Recently we explored several reasons to have an old-age financial plan in place, and encouragingly around six in ten U.S. workers ages 40 and over in a new TD Ameritrade poll said that they currently have a well-defined retirement strategy. Even better, a 53 percent majority of these respondents said that they have already made adjustments to their old-age savings plan at least three times, and around one in six have updated their plan more than five times. Such behavior is critical for retirement success.
Indeed, over time your long-term financial aspirations may change considerably for a variety of reasons, many often out of your control, and the best way to make sure that you achieve your new goals is to update your plan accordingly. These adjustments can include increasing the amount of money you regularly save and/or delaying retirement. Even if you have yet to experience any major events that would require an immediate change to your plan, simply the fact that life expectancy continues to drift higher due in part to rapid medical advancements is something worth considering. Fortunately, 81 percent of surveyed adults who already shifted their old-age financial strategy cited a need to prepare for a longer lifespan (retirement to fund) as one of their key motivations.
Other steps currently being utilized by respondents to put themselves on a better financial footing in old age include cutting back on their discretionary spending, acquiring long-term care insurance, consulting with a professional financial advisor, and maximizing annual contributions to 401(k)s and other retirement accounts. However, even with the forward-looking mindset displayed by many respondents, there is clearly still some room for improvement when it comes to retirement preparedness. For example, 59 percent of respondents in the 40-49 age group said they have yet to set aside at least $100,000 for retirement. Older workers on average had much larger sums of money saved away, but more than a fifth of respondents in the 60+ age group still have yet to even set aside $50,000.
TD Ameritrade’s Dara Luber added that “Americans don’t ramp up their retirement savings until they reach their 60s – this is where we see the biggest shift in saving attitudes. At the same time, the top retirement advice they’d give to their younger selves would be to start saving and investing earlier in life.” Another thing that is not helping is dipping into long-term savings early, as evidenced by the 44 percent of respondents who admitted to having already withdrawn money from their 401(k) or similar plan prior to retirement. Further, only around a third of surveyed workers in the 50+ age group said that they are taking advantage of the catch-up contribution rules that allow them to save more to their 401(k)s, IRAs, and similar plans than standard annual limits would allow.
Sources: TD Ameritrade, Harris Poll