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Retirement income education needed

By Dr. Don Taylor · Bankrate.com
Monday, July 21, 2014
Posted: 6 am ET

I'm a decade away from retirement. But I asked my friends who are retired what they felt was the most important issue facing seniors today. Once they got past the E.D. jokes, their answer wasn't what I expected. It wasn't healthcare, or long-term care or Medicare. It was retirement income.

Admittedly it was a small sample size. But a recent Consumers' Research poll corroborates this finding: 26 percent of respondents older than 70 say they don't have enough savings for retirement and another 22 percent are not sure, according to a recent article on PlanSponsor.com.

© Andrey_Popov/Shutterstock.com

I think the retirement income issue is just going to get worse over time. One of the harshest economic realities for U.S. workers over the past three decades, to my mind, is that employers have pushed the responsibility for retirement savings on the employee by offering defined contribution plans such as 401(k)s instead of defined benefit plans such as pensions without the employer, or the government, providing adequate education to the employee about what this new responsibility requires.

It's true that some incentives exist to attract workers to these plans. For instance:

  • Nearly 89 percent of 401(k) plans reportedly provide some kind of matching contribution by employers.
  • Employees at firms have to take action to opt-out of participating in the firm's plan.

Still, too many workers focus more on current spending than saving for their future.

Social Security not enough

Trying to live just on Social Security retirement benefits is a difficult path. When the Social Security Administration reported its December 2013 beneficiary data on April 2, 2014 (thank goodness it waited a day), it said that the average monthly benefit for retired workers was $1,294 and that among elderly Social Security beneficiaries, 22 percent of married couples and about 47 percent of unmarried persons rely on Social Security for 90 percent or more of their income. It also reported that 51 percent of the workforce has no private pension coverage and that 34 percent of the workforce has no savings set aside specifically for retirement.

Having your home paid off prior to retiring can reduce your retirement income needs and increase the financial backstop available from a reverse mortgage loan on the property. For those still in the workforce, living more simply to allow for increased retirement savings would help, too. So can insuring against major drains on income in retirement by having a long-term care policy -- but that creates its own set of retirement income requirements because you need to pay the policy premiums.

If you're retired, I'd love to hear from you on how you're making your finances work in retirement. If you're still in the workforce, I'd like to hear how you are planning to meet your retirement income needs.

Read about the retirement income gap between rich and poor.

Follow me on Twitter: @drdonsays.

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3 Comments
DF
July 22, 2014 at 11:18 am

As the benefits manager at my company, I schedule our 401k provider yearly to talk to the employees about retirement. They offer one-on-one help in addition to the group meeting. They have documentation in Spanish and English and bring a Spanish speaker. They have graphs showing how much is needed to attain certain goals. There is information on the quarterly statements as well as the website. About 2% take advantage of the one-on-one meetings. The rest nod along and never ask questions. And of course they are not contributing in a material manner. This applies to white collar and blue collar workers of various ages. The employer can only do so much before personal responsibility kicks in.

carlyt
July 21, 2014 at 5:08 pm

One of the problems is a lack of education about retirement and retirement planning. Planning for retirement should be a priority for everyone. For those who can afford to save/invest the key is to start saving/investing early in life, be consistent, take advantage of any employer matching plan, max out contributions when possible, eliminate debt, avoid risks with your nest egg and plan for multiple streams of income once retired. There are many sites on the web that provide information on this. I found that the site Retirement And Good Living offers information on financial topics, health, retirement locations, part time work and also has a great blog of guest posts from around the globe about a variety of retirement issues.

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