May 21, 2015 - 3:19 am
(BPT) – More than half of Americans are worried about running out of money when they retire, yet a staggering 80 percent don’t have the knowledge they need to successfully build a nest egg and make it last throughout their retirement, according to The American College 2014 Retirement Income Survey. Yet by changing just five basic behaviors, Americans can improve their retirement-saving habits – and their likelihood of staying financially secure throughout retirement.
In the Retirement Income Literacy Survey of more than 1,000 people by The American College of Financial Services, 52 percent said they were at least moderately worried their savings wouldn’t last through their retirement. They’re right to be concerned, says Jamie McInnes, senior vice president of total retirement solutions at Prudential Retirement.
“Retirees face many challenges when trying to save enough money to last throughout their lifetime,” McInnes says. “What they might not realize is how common behaviors that all humans give into from time to time can have a big impact on retirement readiness. By learning to recognize and avoid these behaviors, more American workers can successfully plan for their retirement years.”
Prudential’s research has identified some common behaviors that keep people from saving, and what motivates people to plan for a secure retirement.
1. Underestimating life expectancy.
A study by the Society of Actuaries found that more than half of Americans underestimate how long they’ll live – and how long their savings will need to last. Better health care and increased life expectancy mean you may live 20 years, 30 or even longer as a retiree. This means it’s not only important to save for retirement, but to understand how to make your savings last throughout your lifetime.
2. Procrastinating about retirement saving.
When you’re wrestling with everyday financial commitments, it can be tempting to put off saving for retirement. In fact, 53 percent of workers polled by the Employee Benefit Research Institute cite cost of living and day-to-day expenses as the top reasons why they don’t save for retirement. Yet starting early with just nominal monthly contributions can help build your nest egg. The sooner you begin saving, and the more you save, the more money your investments can earn toward your retirement.
3. Failing to expect – and prepare for – the worst.
Job loss, illness, accident, the death of a spouse – many things can impact your ability to save for retirement, and your income during your retirement years. While it is human nature to hope nothing bad will ever happen, it’s important to be realistic when planning for retirement. Hope for the best, but plan for the unexpected.
4. Giving in to the urge to follow others.
Human beings are very social; if you see other people doing something, you want to follow. But sometimes “following the pack” when it comes to making financial decisions can get you in trouble. Resist the temptation to “keep up with the Joneses.” Only buy what you can afford. Staying on track for retirement often means resisting peer pressure.
5. Allowing “I want it now” thinking to impact retirement savings.
Human brains are hard-wired to live in the moment. An “I want it now” approach to spending could lead you to have trouble putting money away for tomorrow. An occasional splurge may be OK, but don’t get yourself into a spot where you think you have to tap into your retirement savings to fund impulse purchases. Dipping into your retirement savings can be devastating to your long-term financial goals.
“Putting money aside for retirement while you’re still working is vital, but it’s only part of the solution,” McInnes says. “By learning to recognize how common human behaviors may be sabotaging your retirement security, you stand a much better chance of sticking to a solid savings plan that can keep you financially secure throughout your retirement.”
For more information and advice on saving for retirement, visit Preparewithpru.com, and bringyourchallenges.com, which illustrates the five common behaviors that can get in the way of successful retirement planning.