Advisers can boost retirement readiness but calculators can do more

It's not surprising that using an adviser can improve a person's odds of having enough money for retirement. What might be surprising is that using an online calculator can help even more. Families in the highest income quartile bolstered their chances of having enough money in retirement by 14.7% when they used a calculator to find out how much to save. That compares with an 11% outcome improvement for high-income families who consulted an adviser, according to the Employee Benefit Research Institute. In the lowest income quartile, families who reached out to an adviser bettered their odds at having enough money in retirement by 9.1%, a rate that jumped to 14.6% for those who used a calculator. One possible explanation for the advantage calculator-users had over advisory clients: Investors don't always heed the advice they get from their advisers. “It could be that they're not following the advice, or that they went to the adviser and asked about asset allocation, but they didn't seek any advice on retirement savings,” said EBRI research director Jack VanDerhei, co-author of the report. Naturally, individuals who guessed how much they needed to save for retirement ended up with the worst outcomes. Families in the lowest income bracket hurt their chances by 5.1%. Higher-income families weren't immune to the hazards of eyeballing retirement savings. Their odds at a good retirement outcome fell by 7.8%. The data come from EBRI's latest Retirement Confidence Survey, a poll of 1,003 workers and 251 retirees in the U.S. The study was co-sponsored by Mathew Greenwald & Associates Inc. EBRI used a projection model to simulate retirement and determine whether 101 of the participating households are likely to run out of money. This so-called Retirement Readiness Rating measured how well-prepared households are to come up with adequate retirement income, based on their savings targets. Among the participants, 66.1% of simulated outcomes for single males would have them retiring with sufficient income, compared with 61.6% of females. Meanwhile, only 45.8% of the simulated retirement outcomes for married households would yield sufficient income, based on their savings targets.