Knowledge and action are not always aligned, and a study by Voya demonstrates such a misalignment for retirement savers. According to the study, Americans are generally behind in terms of retirement readiness, particularly falling short in figuring out how to save.
The study divided retirement preparation into three categories: sufficient knowledge and awareness of how to prepare (“knowing”); accurate and comprehensive planning activity (“planning”); and adequate savings to generate sufficient income replacement (“having”). For two groups, employees and retirees, the study asked a series of questions designed to assess all three categories, then scored the answers from zero to 10.
The Big Picture
Employees: Employees received an average score of 5.8 out of 10 for the first category, knowing how to save. For the planning category, their average score was 3.0, and 3.5 for having adequate savings. Their overall average was 4.1.
Retirees: Retirees scored better, with a score of 7.0 out of 10 for knowing how to save, 4.2 for planning, and 5.3 for having enough savings. On average, the overall score for retirees was 5.5.
Confidence and Concerns
Employees: The study found that 65% of employees report they are at least somewhat confident in their ability to live securely throughout their retirement. Yet 59% of them reported a high level of concern about outliving their retirement savings.
Retirees: Among retirees, 82% are at least somewhat confident in their ability to live securely throughout retirement. However, 65% said they expect to live more than 20 years in retirement, even while 40% don’t believe their savings would last beyond 20 years.
What They Know
It appears from the study that increased emphasis on educating employees about financial activities that can lead to retirement security is working. When asked about the importance of a few of the following actions, significant numbers of employees reported they are extremely or very important:
What They Do
The disconnect between knowledge and action is apparent, though, when employees who participated in the study were asked whether or not they had actually taken these financial planning steps:
Role Models Who Know and Do
The study identified a subset of employees and retirees who could be considered role models, because of their proactive status relative to retirement preparation. They scored highest on the study’s index because of the following key findings, among others.
You can read more results from the survey, the Voya Retire Ready Index, at http://tinyurl.com/VoyaRetireReady.
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