According to a study by Fidelity Investments, although many retirees (66%) reported that they are currently living the lifestyle they always wanted in retirement, a little more than half (57%) wish they had done more before retirement to prepare for those years. If you are nearing retirement, use these survey findings as a guide for your own retirement planning.
Steve Deschenes, V.P. of Fidelity Institutional Retirement Services Company, says that, “Workers approaching retirement often look to their peers who have already gone through the process for valuable lessons learned.” He furthers, “Those living in retirement now can provide valuable insight for people getting ready to make that transition, from knowledge of the basic fundamentals such as the key elements of a successful income plan, to identifying resources that can help with critical decisions that need to be made.” For the most sound retirement planning, be sure to also seek advice from a retirement planning expert, so you know you are getting a professional’s opinion, in addition to those of your loved ones and friends.
The Fidelity survey found that the following characteristics of retirement planning were forgotten (regretfully so) by current retirees. Respondents said they wished they had:
1. Created a budget (21%)
2. Created an asset allocation strategy (19%)
3. Developed an income source withdrawal strategy (18%)
4. Better understood 401(k) plan payout options (19%)
5. Retired later (17%)
The survey also found that although the vast majority of pre-retirees (81%) are confident that their retirement lifestyle will be ideal for them, many have yet to complete some of these most critical planning steps:
1. 68%, nearly two-thirds, of pre-retirees haven’t completed a budget including anticipated income and expenses.
2. 74% have yet to determine an asset allocation strategy to help manage their income in retirement while seeking continued growth for their savings.
In addition, pre-retirees indicated that they need additional guidance and education on fundamental financial issues surrounding retirement, such as:
1. Only 28% stated that they fully understand how much they can spend on a monthly basis during retirement so as to not outlive their savings.
2. Less than 23% say they completely understand which retirement accounts to spend first in order to minimize taxes
3. 50% said they were unsure of the age at which most people can withdraw money from a tax-deferred savings plan without incurring a penalty (59.5 years).
Seek assistance! The report also showed that when asked what advice they would offer to a friend or family member within a year of retiring, they recommended seeking guidance to help with the transition. The majority of these retirees (77%) reported that they chose not to go to their employer for assistance and guidance throughout the retirement process, but those who did said they found significant value in this help.
Some of the lessons learned from this survey are:
Do your homework. You need to understand the benefits you will receive and you must learn the tax rules regarding your investments.
Make a retirement plan. Know how much you can expect to earn from your investments and create a realistic budget including your projected income and related expenses.
Get help if you need it. Seek professional advice either from your employer or a retirement planning expert. The intricacies of retiring are many, and you shouldn’t go it alone.