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Retirement Research Reveals Higher Confidence but Lack of Financial Readiness

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Just five years after the onset of the financial crisis, Americans' confidence about retirement appears to be rising with the strengthening economy. Yet, the steps people take to prepare financially for this milestone has remained relatively unchanged over the past few years. According to the New Retirement Mindscape® 2013 City Pulse index, two in five (42%) Americans report feeling on track for retirement which is significantly more than those who felt this way last year (only 37%), and in any other year since the index began in 2010.

However, while confidence rises, the level of action taken by consumers to prepare for retirement does not. While nearly three in four (72%) admit having taken some action to prepare for retirement, this number is smaller than in 2011 and 2010 when the economic recovery was still unstable.

The annual New Retirement Mindscape City Pulse index examines the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement. The index has also served as a barometer for national and local retirement trends.

Preparing for retirement is even more important in the face of potential challenges like affording health care. Funding health care costs now and in the future proves to be a financial concern for many consumers; nearly half (45%) of Americans think that providing for their health care expenses in retirement will be one of the most challenging financial issues during retirement. Likewise, two-thirds (68%) of Americans express concern about the pending changes due to the Affordable Care Act, and half (51%) of those concerned say their top worry is that they will end up paying more for health care.

Of the 30 largest US metros, at the top this year are San Francisco-Oakland-San Jose (#1), Detroit (#2), and Hartford-New Haven (#3) as the most confident and prepared. There are a few things that set these cities apart from less retirement-ready areas; if you prepare for retirement, take note of the following factors that can help you feel more prepared for and confident about retirement:

• Contribute to retirement accounts beyond a workplace-sponsored plan. More residents than average in the top three cities have contributed to IRAs or other personal investment accounts (other than or in addition to workplace-sponsored plans). There is great value in making regular financial contributions to these types of accounts and saving as much as possible. Having more money in savings and maintaining a diversified portfolio that includes different kinds of investments will likely make you feel more confident about your ability to afford the things you need and want after you leave the workforce. You may also have more control over your personal accounts compared to your employer-sponsored plan, and withdrawals typically carry fewer penalties – though it is important to avoid withdrawing from you retirement savings accounts if possible.

• Maintain positive feelings about retirement. Unfortunately, there are many things one does not have control over, including the markets and other factors that make the national economy fluctuate. However, you can influence how you respond to financial ups and downs – economic, personal, or otherwise. Respondents in two of the top three cities were far more likely than the national average to say that thinking about retirement makes them feel empowered. Thinking positively about the future – and acting on those feelings by taking proactive steps to prepare – is key to helping build retirement confidence.

• Consider working with a financial professional. Residents in two of the three most retirement-ready cities were more likely to work with a financial advisor compared to the national average, which may contribute to their feelings of confidence and preparedness for retirement. The national survey results uncovered that only one in four (23%) Americans say they have determined the amount of money they need to save for retirement and even fewer (11%) report having a written financial plan. A financial advisor can help you determine how to define and work toward your retirement goals, and encourage you to take the right steps to proactively prepare for this milestone.

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Ameriprise Financial created the New Retirement Mindscape 2013 City Pulse index utilizing survey responses from 10,045 U.S. adults ages 40-75. The survey was commissioned by Ameriprise Financial, Inc. and conducted online by Harris Interactive from June 6 - June 26, 2013. The national average sample and the 30 U.S. metropolitan areas were each weighted independently to best represent each area. Propensity score weighting was also used to adjust for respondents' likelihood to be online.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.

This communication is published in the United States for Texas only; and this advisor is licensed only in the states of CA, CO, FL, KS, MO, NC, NM, OK, TX, and VA.

 



 

M. Ahmad Adnan, CFP®, CRPC®, RFC®
Financial AdvisorBusiness Financial Advisor

Ameriprise Financial Services, Inc.
3200 Steck Avenue | Suite 250 | Austin, TX 78757
Phone: 512.213.6400 Ext. 102 | Toll Free: 866.238.4230
Email: masroor.a.adnan@ampf.com
ameripriseadvisors.com/masroor.a.adnan

© 2013 Ameriprise Financial, Inc. All rights reserved.

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