The Five Biggest Things That Confuse Americans About Retirement
The Five Biggest Things That Confuse Americans About Retirement
Retirement: What people say about their readiness
Kerry Hannon Sun, August 6, 2023
Americans think they'll need to save $1.8 million for a comfortable retirement, according to a new survey. But for many of them, that’s just a shot-in-the-dark guess. Many have no idea how much they should save or how to invest whatever money they sock away. They’re baffled by many other essential facets of retirement planning, the survey released this week from Charles Schwab showed.
That’s a real problem because what Americans save is supposed to become a major source of income in retirement, and, if they're clueless on the basics, many may under-save and face a shortfall in their old age.
"The workers we surveyed may be 5, 10, 20, or even 30 or more years away from retirement, but the gap between now and the future can make it difficult for savers to nail down specifics about what they imagine their lives will look like in retirement," Marci Stewart, director, communication consulting and participant education for Schwab Workplace Financial Services, told Yahoo Finance.
"That raises the bar on providing access to quality education and professional advice."
Here are the five biggest things that confuse Americans about retirement, according to the Schwab poll.
How much should I save?
More than four in 10 workers (41%) polled said they need help calculating how much money they need to save for retirement. In fact, a recent survey from Transamerica Center for Retirement Studies actually found that 45% of workers said they guessed the amount they need to save for retirement.
"Retirement calculators are widely available online and they are great tools to help people get a sense of whether they are on track," Stewart said. Check out AARP, Bogleheads, Fidelity, Schwab, or Vanguard to start.
Plan on some soul-searching and sleuthing.
"Consider what you need to enjoy the life you want to in retirement,” Liz Davidson, CEO and founder of Financial Finesse and author of "Money Strong: Your Guide to a Life Free of Financial Worries," told Yahoo Finance. "That number may be significantly lower than what you need right now. From there, consider what income sources will be there for you in retirement, like Social Security or even a pension."
If you have a personal my Social Security account, you can get an estimate of your future monthly retirement benefits and see the impact of different retirement age scenarios from retiring right now to your full retirement age or at age 70 based on your actual Social Security earnings record. If you don't have an account yet, you can set one up on the site. You might factor in a scenario where Social Security benefits are reduced 25% compared to your estimated statement to take into account the potential for the 2034-35 estimate for depletion of the Social Security Trust Fund.
One way to boost retirement savings is to check to be sure you are saving enough of your income in your employer-provided plan to score matching funds they contribute, Davidson said.
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