Greater than eight in 10 People say pandemic damage their retirement plans
More than eight in ten Americans say the events of the past year affected their retirement savings. A third estimate it will take two to three years to get them back on track Fidelity Investments’ retirement plan study in 2021.
Happily, most are still confident they can retire when and how they want, and 36% are now even more confident about their retirement plans than before, says Melissa Ridolfi, senior vice president of retirement and cash management at Fidelity Investments .
The study, which focuses on the effects of the past year on retirement planning, points to the positive impact of an existing retirement plan on dealing with the storm. However, the results show that almost four in five respondents say they had reassessed their priorities over the past year. While concerns have decreased in some areas since the pandemic began, people are still more stressed than they were before on several fronts compared to the pre-pandemic world.
“Last year has been a roller coaster ride, but Americans on a retirement plan should find it a relief knowing that the fundamentals are staying solid,” says Ridolfi.
Although the survey shows 36% of Americans are more concerned about holding a nest egg in retirement than they were when the pandemic began, retirement accounts hit record levels in the fourth quarter of 2020.
“(We) posted record levels of planning contracts with customers all year round,” claims Ridolfi.
For those looking to bolster their financial futures, the study confirms the important role planning can play, she says. According to the results, just taking steps to visualize a retirement plan can lead to a greater sense of confidence and control.
Overall, Americans fall into three categories when it comes to how people plan their retirement. A third say they have a plan to achieve their goals. 31% have thought about it extensively, and the remaining proportion of respondents have not yet started planning, says Ridolfi.
Across the board, those with the most detailed plan for achieving their goals said they had the most confidence, she says, adding that even just getting started on a plan can have positive effects.
Millennials are slightly more likely than their older counterparts to say they have a plan to afford their desired retirement lifestyle (35%), compared to Gen X (34%) or baby boomers (32%), although the closest to boomers are retired. Part of this can be attributed to the fact that millennials were almost twice as likely to report on online tools and calculators as boomers.
According to Ridolfi, these tools can provide the instant satisfaction when a plan takes shape in just a few clicks, something many have become accustomed to in the digital age.
In addition, the key considerations or ingredients for a “plan” differ from generation to generation. For the 30 years after retirement, including most millennials, having a plan means they have established how much they should be saving on a regular basis and what accounts to put those savings in based on tax and investment considerations. As people near retirement they need to think about and plan for more complex issues.
“For those with a longer time horizon, it may be comforting to know that creating a plan may be easier than you think and will give you the perspective to focus on what you need to do to achieve your goals,” says Ridolfi. “As you approach retirement, the good news is that it is never too late to start planning your future, regardless of age or income. The study results clearly show that creating a retirement plan becomes a bigger one Feeling of trust and security can result. ” control and ultimately give people a better sense of where they stand at any age. “
Here are some key findings from the study.
* Only 25% of respondents accurately stated that finance professionals recommend that people save 10-12 times their last full year of work until they reach retirement age. Half of all respondents believed the number would only be five times their income last year or less.
* When it comes to withdrawals, 28% of respondents say that financial professionals would recommend a withdrawal rate of 10% to 15% of retirement assets per year. However, withdrawing this amount would likely use up the retirement savings quickly and be well above the 4% to 6% annual withdrawal rate suggested by many financial advisors.
* Almost three quarters (72%) of respondents believe the stock market has had negative returns more than positive returns over the past 35 years. In reality, the stock market has had positive annual returns for 26 of the past 35 years.
* Most respondents underestimate the cost of medical care for a retired couple, with 37% estimating between $ 50,000 and $ 100,000. In fact, for a couple who retire at age 65, the actual average cost during their retirement is estimated to be three times higher at $ 295,000.
* Although people can start receiving social security benefits from the age of 62, they still have to wait a few years before they reach full retirement age. Claiming social security benefits before full retirement age can lead to a permanent reduction in monthly income. Only 17% correctly identified their full social security retirement age, including 44% of Gen Xers who tended to underestimate their full retirement age of 67
The results were compiled from a national online survey with responses from 1,204 adult financial decision-makers who were not retired.
Respondents had at least one investment account and those over 34 had investable assets of at least $ 100,000.