Although a majority of Americans believe that there is a retirement crisis in the United States, most of them believe they will not be affected by the paucity of post-retirement finances. Research conducted by Fidelity, Vanguard, T. Rowe Price, Bankers Life, Bank of America, Merrill Lynch show that a substantial portion of surveyed Americans does not know how much money they will require for comfortable retirement. They also do not know how much they could withdraw during retirement so they could not outlive their savings.
Lack of financial sense
In a Retirement IQ survey by Fidelity Investments, the average score turned out to be 30 out of 100. Approximately three quarters of total respondents have underestimated the amount of money they must save to retire. Most of them thought the amount of money for retirement is three times their annual income although the actual recommendation is minimum 10 times their actual income. A similar survey by Merrill Lynch/ Age Wave discovered that 81 percent of individuals did not figure out the amount of money they require to retire in life. Only 37 percent of the middle income boomers can be described as prepared for a secure life post retirement.
It does not stop there. According to a Vanguard survey, only 55 percent of the pre-retirees have calculated the quantum of money they need for retirement. Even a fewer number of respondents- 43 percent – have done the needed planning to generate the retirement income. These discoveries were corroborated by Fidelity. Only 38 percent of respondents aged between 55 and 65 years of age gave the correct answer when asked how long the retirement savings could last. The right answer to this question is 22 years.
Underestimating healthcare costs
The extra years mean you can enjoy life and the company of your loved ones. This means, however, it would take much more years to cover the expenses. This is the reason, as per a study conducted by T. Rowe Price. 59 percent of the boomers termed the longevity bonus both a curse and a blessing.
Fidelity discovered that people are not realistic when it came to healthcare. A whopping 72 percent of respondents to the Fidelity survey have underestimated how much amount of money a couple deciding to retire at 65 years will spend on healthcare post retirement. The right answer is $260,000. Many of those surveyed lower estimated the amount by $200,000.