I love the annual Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. In fact, I referenced the 2013 survey quite extensively in my book to help paint a picture of the retirement landscape. This annual survey is an excellent source for getting an overview of how Americans are preparing for retirement and their confidence level.
The survey takes a look at who is saving, how much they are saving, if they have attempted to calculate how much money they need to save for retirement, and the impact of work place savings plans.
A nice positive from this year’s survey? Fact Sheet #6 – Preparing for Retirement in America notes that worker’s confidence in having enough money to live comfortably throughout retirement increased in 2014, after having been on a downward trend for several years.
Unfortunately, there are a significant number of negatives. One such negative was that less than half of workers, 44%, report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement.
Not surprisingly, workers who have done a retirement savings needs calculation, compared with those who have not, tend to have higher levels of savings. I assume most SavvyReaders have calculated how much they will need in retirement. I know I have.
This week’s SavvyPoll asks, “What is your retirement nest-egg goal?”
A. $100,000 – $500,000
B. $500,001 – $750,000
C. $750,001 – $1,000,000
D. More than $1,000,000
I was interested to see that all responses were either ‘C’ or ‘D’ which means readers have calculated that they will have (or require) a retirement nest-egg that exceeds $750,000. Interesting because while I am reluctant to say that someone is wrong for choosing less, I would question how they arrived at the conclusion that $400,000 – as one example – will be enough to sustain them for possibly 25 years or more, particularly if we are talking about a married couple. After all, when you consider drawing down a nest-egg such as the $400,000 example, using the 4% rule, that is only $16,000 annually.
Also, as I touched on in my response to Char B, I’m curious to know if most people are thinking about the impact of inflation when developing retirement plans. As an example, assume a couple is planning to retire in their mid-60s, ~ 30 years from now, and they are projecting a $2M nest-egg. If we assign a rate of 1.5% inflation annually, the value of $2M after 30 years is reduced to $1,279,524.86. If they want the value of $2,000,000 today – in 30 years – they will need $3,126,160.44. Along with taxes, the impact of inflation is something to think about if you haven’t.
With all that said, the results…