When it comes to saving for retirement, many would rather spend now instead — and often prove it by pulling money from what retirement savings they do have.
So says the latest E*Trade "StreetWise" study of experienced investors, which found that 40 percent of investors — and among those under 34, 58 percent — would rather spend money on themselves now than put those funds aside.
They aren't devoting any windfalls to retirement savings, either; only 28 percent of those who get bonuses at the end of the year are planning to put that money away as retirement savings.
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Those who have retirement savings aren't doing all that well at hanging on to the money; almost half (47 percent) of investors under 34 have made early withdrawals from their 401(k)s, despite the fact that half of this population has no other kind of retirement savings.
This could all be turned around, of course, with some changes in behavior, and the E*Trade folks have some suggestions advisors can pass along.
"The end of the year is a natural time to review your retirement goals and the progress you made in achieving them," said Lena Haas, SVP, retirement, investing and saving at E*TRADE Financial, in a statement. "Making disciplined contributions is the key to success — and may be the most significant factor in the health of your retirement account. Fortunately, there are a number of actions investors can take to create a systematic approach to saving for retirement."
What does Haas suggest? First and foremost, advisors need to convince their clients to switch to automatic contributions, which takes the guesswork out of consistent savings. Second, advisors need to makes sure clients understand their retirement plans, so they know what they can and can't do to get extra money (loans rather than withdrawals) or, for the over-50 crowd, help them catch up on contributions if they've fallen behind.
Third, review client portfolios with them to see if there are any investments offer the chance to harvest losses against the upcoming tax season.
And fourth, make sure they get what's coming. For those in 401(k)s, that means contributing enough money to make sure they get the maximum employer match. For those in IRAs, it means kicking in the annual maximum ($5,500 for those under 50, and $6,500 for those 50 or over) to get the maximum pretax dollar benefit.
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