Nearly half of Americans are not contributing to a retirement plan, and those under age 34 are more likely to be among the people who aren’t saving, according to a new LIMRA survey.
The survey, which included 2,697 Americans who are either primary financial decision-makers or share responsibility for making financial decisions, also found that a quarter of all Americans and less than a third of Americans over age 50 worked with a financial professional to plan for retirement.
Those who sought the help of a professional were more likely to contribute to a defined contribution plan or IRA. Seventy percent reported that their financial professionals recommended how much they should save for retirement, which shows that financial professionals can have a positive influence on their clients’ saving behavior, according to LIMRA.
“The findings from this survey were disturbing, given that people will increasingly need to rely on their personal savings to make ends meet in retirement,” said Matthew Drinkwater, associate managing director of LIMRA Retirement Research. “It was especially troubling to see that a larger portion of younger Americans – who are less likely to have a defined benefit plan – are not saving for retirement in IRAs or defined contribution plans. In order to have the adequate savings necessary to meet their financial needs in retirement, which could last 20 or more years, it is critical that these individuals begin saving systematically early in their working years.”
Younger and higher-income consumers are more likely to consider contributing to an IRA in the next year, but nearly half of all consumers said they are not planning to contribute to an IRA because they can’t afford to do so.
“In the long run, these individuals would benefit if they made even modest contributions to a pre-tax savings plan that could accumulate until retirement,” Drinkwater said.
The survey also revealed consumers’ lack of knowledge about IRAs. On average, consumers answered almost half the questions posed about IRAs incorrectly; those consumers who currently contribute to IRAs answered only slightly better than non-IRA-owners.
“Despite the extensive news coverage on the need to save for retirement, a large number of Americans are not heeding the warnings and preparing financially,” Drinkwater said. “Our survey shows that consumers often lack understanding of the savings vehicles that could help them attain their financial goals for retirement.”
LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.