Workers who tapped a financial professional for advice or used an online retirement calculator were more likely to save enough for retirement, according to a new issue brief by Jack VanDerhei and Nevin Adams of the Employee Benefits Research Institute.
Based on its research as part of the 2013 Retirement Confidence Survey, EBRI found that those using an online calculator or those who sought the help of a financial advisor were more likely to set adequate savings targets for retirement. Those in the lowest income quartile showed a 9.1 to 12.6 percentage point gain (depending on family or gender) in the probability of not running short of money if they asked a financial advisor, and a 14.6 to 18.2 percentage point increase if they used an online retirement calculator.
The people who guessed at a retirement savings target were less likely to choose an adequate target, the survey found.
Based on data from the survey, EBRI found that younger households are providing assessments of required savings that are more likely to be adequate than their older counterparts. Less than half of the simulated retirement paths for Early Boomers (individuals born between 1948 and 1954) and Late Boomers (those born between 1955 and 1964) would have adequate retirement income based on their estimated savings target. However, 62.7 percent of the simulated retirement paths for Generation X and 55.4 percent of Generation Y would have adequate retirement income based on their estimated savings target.
The authors also found that the Retirement Savings Shortfall was significantly lower for single males than single females and that married couples didn’t take into account higher household expenses in their calculations. Nearly two-thirds of simulated retirement paths for single males would have adequate retirement income and 61.6 percent of single women chose savings targets almost as large. Less than half, 45.8 percent, of the simulated retirement paths of married households would have adequate retirement income based on their chosen savings targets, the study found.