Investors need to plan to build savings for retirement but many do not think they have enough money to warrant making a plan, according to Schroders’ U.S. Retirement Survey released Thursday.
“It’s a Catch-22 situation. Investors need a plan to generate enough assets for retirement, but they don’t think they have enough assets to justify a plan,” Joel Schiffman, head of intermediary distribution for Schroders North America, said in a statement.
Seventy percent of participants in the survey said they do not have enough saved to formulate a plan, according to the survey by Schroders, a multinational asset management company.
However, “planning doesn’t require a lot of assets; it starts with setting a goal and saving toward it by taking advantage of an employer’s defined contribution plan or opening an investment account or IRA. Every dollar saved and invested is a step closer toward being able to generate sustainable income in retirement,” Schiffman added.
According to the retirement survey of 1,000 people in the United States age 45 to 75, there are a lot of people in or near retirement who are not taking that advice.
Only 18% of non-retired respondents age 60 to 67 said they have done a very good job of saving and are “fully on track” for retirement. Just 26% of this age group said they have enough money saved for retirement, while fully 60% said they do not have enough saved, and 14% did not know if their savings were adequate. Saving for the future came in third for all respondents when they were asked what they were focusing on. Health and fitness and spending time with family were first and second.
Respondents reported holding large amounts of savings in cash, which may a result of their lack of planning or uncertainty about their future needs, Schroders said. Participants age 45 to 59 had 27% of their assets in cash and 30% in equities, while those age 60 to 67 but not retired reported having 27% in cash and 35% in equities.
Almost half of all respondents said they had no idea how their assets for retirement were allocated.
“The good news is people are focused on saving for the future even during Covid. But the question remains, ‘Will they have enough for retirement?’ The way to improve retirement readiness is through better knowledge, guidance and investment choices,” said Schiffman. “Not knowing how your assets are allocated, or holding one-quarter or more of your retirement savings in cash, indicates there may be a need for a greater understanding of how a diversified portfolio could maximize growth while managing risk.”
Large majorities of participants said they are concerned about high healthcare costs and a major downturn in the market adversely affecting their retirement.