For many people, retirement has become a guessing game.
In fact, according to one survey, they have no idea how much they need to save for retirement. investigation by the non-profit Transamerican Center for Retirement Studies (TCRS), in collaboration with the Transamerica Institute.
Based on the median value, workers surveyed estimate that they will need $500,000 by the time they retire to feel financially secure. Estimated needs vary by generation, with Baby Boomers estimating $750,000, Gen X and Millennials needing $500,000, and Gen Z needing $250,000. Nearly one in five workers across generations, including baby boomers (24%), Gen X (22%), millennials (21%) and Gen Z (17%), estimates they need to save $2 million or more.
So how did they come up with such high numbers?
It looks like he threw a dart. Of those employees who provided estimates, nearly half said they were guessing how much they would need to save for retirement.
“Retirement security is very precarious for many workers and this is a big concern because it can have a negative impact if not taken seriously,” said Catherine Collinson, CEO and president of the Transamerica Institute and TCRS.
The survey, conducted among 5,725 for-profit employees from November 8 to December 13, 2022, found that about 4 in 10 cross-generational employees, including Gen Z, Millennials, Gen X and baby boomers, have guessed their needs, while about 1 in 5 employees have used a retirement benefit calculator or completed a worksheet, based on amounts provided by financial advisors. It turned out that even fewer employees were estimating.
“You shouldn’t think about retirement”
As if this wasn’t enough, a significant 42% of workers agree that they don’t want to think about or care about retirement investments until their retirement date is near, with 13% strongly agreeing and 29% somewhat agreeing. Gen Z and millennials are more likely than Gen X and baby boomers to agree with this statement (56%, 47%, 40% and 25% respectively).
“It’s amazing,” added Collinson. “Not wanting to think about it is really non-negotiable. Assessing your savings and retirement income needs and setting goals are the cornerstones of future financial security.”
Sure, like our own personal circumstances, our retirement situation will change along the way, but it’s important to start with a savings goal and update your goals along the way.
Another concern for the generations closest to retirement is that about one in three Gen Xers and more than a quarter of baby boomers do not have a financial strategy for retirement.
Of course, no one wants to live longer than their savings, and that possibility is already a top concern for many workers. A recent Northwestern Mutual found that Americans, on average, have a 45% chance of living beyond their savings, and one-third have not taken steps to address the possibility of living beyond their savings. study.
On average, Americans expect to need to save $1.27 million for a comfortable retirement. report found. The problem is that the average American adult is saving about $89,000 for retirement, just 7% of the target amount.
The study was conducted online from February 13 to March 2, 2023, among 2,740 U.S. adults ages 18 and older.
So what’s lurking behind this Close your eyes and bury your head in the sand approach?
Dan Ariely professor of psychology “It’s a big deal,” the behavioral economics major at Duke University told Yahoo Finance. First, it’s a long-term future, and we generally have a hard time thinking about the long-term future. we haven’t slept enough We text, we drive, we eat too much. we don’t take drugs ”
Second, Ariely said most people feel they’re not doing the right thing in retirement. And who would want to think about what they’re failing at? So it’s not like that.
“It’s clear to people, given their savings and what they’ve done so far, that the answer isn’t ‘Oh, I’ve saved too much.’ “Retirement is actually incredibly complicated, and finding the right answers isn’t easy,” he said.
Here are Ariely’s suggestions for the industry:
“There are a lot of calculators that say you need $4 million to retire,” he says. “It doesn’t happen to most people and it creates a sense of setback. How do you make people feel like they’re not failures? How do you make people feel like they’re making progress and accomplishing? That’s very important. ”
Kelly Hannon is a senior reporter and columnist at Yahoo Finance. She is a workplace futurist, a strategist for her career and her retirement, and the author of her 14 books, including “.Control Even Over 50: How To Succeed In The New World Of Work” And “Don’t be too old to get rich”. follow her on her twitter @Kelly Hannon.