Why it is Important to Have a Solid Retirement Plan

May 28, 2015

Retirees and workers in the United States have been expressing more confidence in being able to afford retirement despite indications that they are not taking the right steps to reach their goals. This was one of the findings in the 2015 Retirement Confidence Survey conducted by the Employee Benefit Research Institute.

One of the most important factors influencing the outlook of Americans on retirement was whether or not they had a savings plan. Researchers said that the overall outlook is much better than it was between 2009 and 2013. They said that the heightened optimism was because of participants or their spouses having retirement plans, IRAs or defined contribution plans in place.

Experts said that people who did not have retirement plans seemed to know that they would face difficulties gaining enough financial resources to retire comfortably. More than 40 percent of workers who did not have retirement plans did not feel confident about having enough funds to enjoy a comfortable retirement. Less than 15 percent of participants who had a retirement plan said they worried about not having enough money to retire comfortably.

Researchers were pleased that the overall confidence levels increased steadily between 2013 and 2015. They said that the increased confidence was based on participants or their spouses acquiring or building retirement plans. Another area where experts noticed a rebound was in workers' confidence in being able to afford various retirement expenses. The percentage of workers who said they felt very confident in being able to pay for their basic needs in retirement increased to more than 35 percent. The percentage cited the year before was only 25 percent. Workers who said they were confident in their abilities to pay for medical expenses continues to increase gradually. This includes regular medical expenses and long-term care.

Retiree confidence in having a secure retirement increased from less than 20 percent in 2013 to more than 35 percent in 2015. However, workers were more confident that they were doing a good job of making financial preparations for retirement. About 25 percent were very confident in 2015, which was an increase from slightly more than 15 percent in 2013. However, workers who do not have retirement plans have low savings amounts.

Slightly more than 20 percent of people without retirement plans have calculated their estimated needs. Almost 65 percent of participants who did not have retirement plans said they had not even saved $1,000 yet. The people in the survey who said they did not feel prepared or felt that their preparations were inadequate also said that their expected retirement ages had changed within the past year.

Overall, most employees still plan to work longer to compensate for estimated financial deficits in retirement savings. While experts say this is a wise concept, it is important to avoid relying completely on the ability to work longer. Researchers pointed out that many people leave the workforce early because of disabilities and illnesses. Adequate disability and long-term care insurance products are essential to protect future income. To learn more about preparing for retirement, discuss concerns with an agent.

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