Why retirees don't act on what they know

Yippee! The Voya Retire Ready Index just came out. Actually, it didn’t just come out; it’s more that I just uncovered it in my pile of things to read. Heck, it may have been old before I put it in there. But none of that matters. What does matter is what it says about how to be financially successful in planning for retirement.

Voya examines the habits and attitudes of those who are doing well in saving for their retirement or who are already retired and have the assets to make it through without running out of money. It’s similar to how Peter Drucker looked at successful companies to see what we should emulate about them or Stephen Covey looked at people who were the most effective in what they did. (Hard to believe they are both gone—I’m getting old.)

If you want to read the report, it is available online (go.voya.com/IndexReport), but for your reading enjoyment I’ll be summarizing and giving my observations about the results. Today I’ll focus on the thoughts and actions of pre-retirees and retirees.

First, most of each group felt confident in their financial preparedness. But other answers reveal a bit of a disconnect. Two-thirds of folks thought they’d live over 20 years in retirement, but only 40% thought their money could last that long.

Almost all the retirees (and most of the current workers by that matter) agreed with the following:

Start saving as soon as possible;
Create a holistic financial plan; and
Figure out how much your savings can support in future monthly income.

Although they say that, their actions again show another contradiction. Only about a third of current workers had a written budget or had used one of the online calculators to see how their savings can support their future income needs. And less than that had a written financial plan.

Retirees are past the point of earning so are a good gauge for measuring our success or failure of saving money.  Of them, 13% couldn’t tell you how much they had in their retirement investments. The rest were fairly evenly divided between under $50,000; between $50 and $500 thousand; and between $500,000 and $1.5million (only 6% had more than that).

Now, that might seem like a lot of money, but most experts I talk to will tell you that $1.5 million can sustain $4000 to $6000 of monthly income. That’s not a bad amount of money…but it’s not exactly lifestyles of the rich and famous either.

No doubt then that about 60% of retirees were extremely or very concerned about running out of money or not being able to afford healthcare expenses. And more than half were worried about becoming a burden on their families.

None of this should surprise regular readers of this column. Still, the importance isn’t knowing where America is in its retirement preparation, it’s in letting you know how to do it better. And we will…next week.

This article was published under the title "You can't save enough" in the Wichita Falls Times Record News on May 3, 2015.