Many go by 'gut feeling,' survey finds; most admit they're not saving enough for old age
The gap remains between understanding the need to save more for retirement and actually saving more for retirement. Indeed, 87% of workers admit they could be saving more in their employer-sponsored retirement plans.
Or at least, that's the finding of a new study, commissioned by the ING Retirement Research Institute. The ING unit found that 64% of respondents said their employer-sponsored plan accounts for all or most of their retirement portfolio.
And the investment allocation process apparently involves a lot of “guesswork” and “gut feel,” according to the research.
Since the economic downturn that began in earnest two years ago American consumers have stepped up their focus on household budgets, spending and saving habits.
But that renewed prudence has not really translated to retirement savings, according to Rob Leary, chief executive, ING Insurance US.
“The issue for many workers, made even more urgent in shaky economic times and an era of volatile equity markets, is scrubbing household budgets and, when possible, funding more dollars to save for retirement,” he said. “Being cost-conscious is certainly important and prudent, but at the same time, people must also find ways to contribute more into their retirement accounts.”
According to the findings, which involved a survey of 1,000 retirement plan participants during the last week of September, most people acknowledge they could contribute more right now.
While 87% of respondents admitted they could afford to increase by 1% their annual contribution to their employer-sponsored plan, 59% said they could increase their contribution by 3% of salary, and 32% said they could afford to contribute 5% more annually.
“We recognize that the current economic environment is challenging for most everyone and robust salary increases are currently not the norm. Nevertheless, Americans cannot delay giving themselves a retirement raise,” Mr. Leary said. “A modest increase in your workplace retirement plan contribution rate can go a long way toward ensuring a more financially secure retirement.”
The survey also found that many investors lacked a clear understanding of contribution rates and the long-term value of even small increases.
Very few of those surveyed consulted outside resources in determining their contribution levels, with 65% determining their contribution rate themselves, and 21% said they “go by gut feeling.”
