Americans are living longer, but many do not have adequate savings to provide for a 20- to 30-year retirement.
A study from the Indexed Annuity Leadership Council (IALC) found one in four Baby Boomers has less than $5,000 saved for retirement and nearly one in four (24%) of all respondents had nothing saved for retirement.
Poolman, executive director for the IALC, who is based in Bismarck,
North Dakota, says the study also found that 60% of Baby Boomers think
they will need less than $1 million for retirement, yet, he notes,
estimates show they could spend up to one-quarter million on health care costs alone.
aren’t thinking about the extra costs needed due to living longer,” he
says. Poolman suggests that is the number one thing retirement plan
sponsors and advisers can do to help employees prepare for longevity—
educate them about how much money they will need. “Part of the reason
people are not saving enough is they are not educated about what they’ll
need,” he contends. “They need to know they will spend one-quarter
million dollars on health care."
Fredrik Axsater, global head of
Defined Contribution at State Street Global Advisors (SSGA), who is
based in San Francisco, says plan design features such as automatic
enrollment at a reasonable default savings rate (he suggests 6%) plus an
employer matching contribution have been good at helping people save
and save more. But, he also thinks education is key.
should show how participant account balances translate into monthly
income on retirement plan statements,” Axsater says. “The account
balance tells them nothing. It’s not fancy, but it’s a basic indication
of how they are doing.”
Axsater adds that SSGA sees in its research more retirement uncertainty for Generation X. “They need to do something now because they still have more time for retirement savings,” he says.
suggests plan sponsors and advisers provide participants with proper
retirement calculators to educate them. He also suggests yearly
checkups—a one on one with a representative of the plan sponsor or with
an adviser to see how the participant is doing, motivate him or her to
save and provide education about how much they’ll need.
addition, Poolman says, “As employees get older, investment goals
change, risk tolerance changes, and employees are not getting that
education on a frequent enough basis. It is incumbent upon employers to
do that. They don’t want employees leaving and having bad feelings that
the company did not provide for them.” NEXT: Getting healthy and retiring later