Financial Planning, Retirement

The Need For Better Retirement Planning

8/24/18 8:00 AM

iStock-626627280.jpgThe retirement outlook has brightened for participants in 401(k)s and other defined contribution (DC) plans, according to a new report from J.P. Morgan. Specifically, 52 percent of surveyed participants said that they expect to be able to retire at their ideal age, and the same percentage believe their savings will last throughout retirement. Although those are significant improvements from earlier surveys, the figures still imply that almost half of participants lack retirement confidence. One likely reason why old-age financial security remains uncertain for many Americans is a lack of planning.

For example, an alarming 12 percent of respondents said that they intend on waiting until they retire to create a financial plan, and almost a third (30 percent) of participants simply said that they are committed to saving as much as they can. Although the latter is a good attitude to have when trying to amass a large retirement nest egg, it is still not a proper plan. Moreover, the report’s authors stressed that “It’s essential for participants to set specific goals, such as when to retire and what retirement lifestyle to pursue, and translate those goals into the contribution rates and, ultimately, the assets required to realize their aspirations.”

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Additional evidence of the need for better financial planning can be seen in the 60 percent of respondents who could not confidently say that they know how much money must be put in their 401(k) plan each year in order to stay on track for achieving their retirement goals. Further, just 39 percent of surveyed participants said that they know how to precisely estimate the total money they will have in their 401(k) plan by the time they reach their target retirement age, and only 34 percent are certain of how much monthly income their savings will be able to provide in old age.

A knowledge gap appears to present another challenge because 51 percent of surveyed DC plan participants said that they want to spend time creating a retirement plan but do not know how to begin. For many of these individuals, working with a professional financial advisor would be a great way to start, especially since it seems that assistance is also needed with investment management. Indeed, only around four in ten survey respondents said that they are highly confident in their ability to make key investment decisions, and just half said that they reviewed their 401(k)’s investments within the past six months.

 


 

Sources: J.P. Morgan

Post author: Charles Couch