Americans Need Retirement Savings Plan of Action: Allstate Spells Out Steps to Gain Control
January 23, 2006
In order to save for retirement, Americans must start the year off with a retirement savings plan that they can stick to for the entire year, according to Allstate Financial's fifth annual "Retirement Reality Check" survey, which measures Americans' outlook on saving for retirement, and sets forth ways they can achieve their retirement goals.
"Our survey asked people what goals are hardest to achieve, and the clear frontrunners were saving for retirement, losing weight and stopping smoking," said Casey Sylla, president of Allstate Financial of Northbrook, Ill. "A distant fourth-place goal was staying physically fit." Thirty-one percent of survey takers said that saving for retirement is the hardest for people to accomplish.
Allstate created the fifth annual "Retirement Reality Check" telephone survey in conjunction with Mathew Greenwald & Associates of Washington. Greenwald polled 1,601 people, all born between 1946 and 1978, with household income of $35,000 or more. The survey results were categorized by sex, geographic region, age, marital status, educational level and household income.
The survey asked respondents to rank goals from the hardest on down and to indicate what would be the ideal first step to achieve such goals. Having a plan of action was the No. 1 tactic, with 44% of respondents saying so. The second was getting the help of a professional, which came in with 29% of respondents claiming that this is the most effective first step. That was followed by sheer willpower (5%), telling family and friends about one's intentions (5%) and getting tips from friends and family (4%).
"So often, New Year's resolutions are abandoned after only a few weeks because people can't see the light at the end of the tunnel," Sylla said. "Our survey suggests that people are more likely to succeed if they set reasonable goals. Instead of seeing the goal only as the whole piece, saving $50,000 for retirement or losing 40 pounds, doing these things in manageable steps will allow people to be more successful."
When asked what, if anything, they thought would prompt them to start saving more money for retirement, 84% of respondents said getting an increase in their salary was the biggest factor. Another 71% said getting closer to retirement was the second-biggest factor, and third, 61%, said children finishing college.
Professional advice is a great tool for people, as it can help them identify goals that are important and at the same time manageable. Also, people tend to be a little more credulous of professional advice. "Once people see results, it is easier to stick to a plan or even increase the goal," Sylla added.
Seeking advice for creating a savings plan might be the right direction, and one that people should take, because there is so much to consider when trying to establish a savings plan. Not only does a professional do the thinking for you, their advice is backed up by their experience and education in the field. "When it comes to saving for retirement, people need to consider a combination of their current income and expenses as well as their long-term lifestyle goals," Sylla added.
"When you look at the big picture, it is easier to identify goals that are achievable and trade-offs you are willing to make to get, and stay, fiscally fit."
Allstate suggests that people follow the following guidelines to create a retirement savings plan that addresses short- and long-term needs. First, determine how much money you need to save by the time you retire. Become educated about different savings options. Monitor savings and investments to determine the appropriate investment choices given your horizon before retirement. Discuss with your spouse how you want to spend retirement. Decide which savings vehicles will help you save more for retirement. Work with a financial professional to ensure your savings and insurance needs are adequate and keeping up with the changes in your life. Determine whether you have prepared for life's unexpected events, including long-term healthcare. Determine how much you will spend each year on your retirement lifestyle. And estimate how much you will receive in retirement from Social Security and your employer-sponsored retirement plan, if you have one.
In particular, the survey found, people need to pay more attention to their assumptions about Social Security benefits. Fifty-seven percent of respondents said that they have major concerns that their benefits will be reduced or eliminated, while 27% say it is a minor concern, indicating that people are extremely pessimistic about Social Security. Sixteen percent claimed Social Security is not a concern at all. At the same time, only 2% said that drastic changes to Social Security would prompt them to save more for retirement.
"It isn't logical to have a concern but then do nothing to address it," Sylla said. "This underscores why it's so important for people to take a hard, critical look at what income they truly expect to have at retirement."
When asked what they and/or their spouse has done to prepare for retirement, 91% said they had educated themselves on the different savings options available.
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