Financial jargon is so confusing that 34% of Americans say they “don’t know where to start” when it comes to retirement planning, according to a new survey from Unbiased.com. In fact, the analysis found that the majority of adults say they lack confidence when it comes to dealing with retirement planning options.
Consider working with a financial advisor for professional help building or adjusting a retirement plan.
What the survey found
The 25% of respondents to the Unbiased Retirement Confidence Survey who said they felt confident choosing one of the retirement options said their confidence was the result of working with a financial planner.
The research also shows that a significant 76% of adults over the age of 50 who are nearing retirement have little or no confidence in the financial options available for retirement savings. Furthermore, only 30% of adults say they have a lot of confidence in the retirement products available to them.
“Retirement can be an overwhelming concept and requires careful planning. Far too many people put this off until it’s too late, or don’t get the right advice,” said Karen Barrett, founder and CEO of Unbiased. “Planning for your retirement is one of life’s biggest decisions and it’s definitely one of those times when you’ll want to consider professional guidance.”
Retirement account literacy
Just over half of respondents said they had a good understanding when it came to workplace retirement accounts such as 401(k)s, 403(b)s and IRAs. However, only 12% said they understand annuities, and only 11% said they have a high level of knowledge about traditional defined benefit pension plans.
Much of that discomfort about retirement vehicles could come from the source of information used by nearly half (47%) of survey respondents: online searches, family members and friends. Only 30% of people surveyed said they had received information from a financial advisor.
The fear of surprises
Other retirement-related areas where respondents felt shaky had to do with the two biggest, most unpredictable expenses in retirement: healthcare and inflation. Healthcare was cited as the top concern by 56% of respondents, who have good reason to be concerned. For example, a widely distributed Fidelity study shows that an average retired couple aged 65 will need to save about $315,000 by 2023 to cover medical costs during retirement.
On the other hand, inflation was cited as a top concern by 59% of respondents. The likelihood of steadily rising costs of living for retirees is a major concern for professional retirement advisors, who often recommend continued investment in stocks to generate the investment gains needed to beat inflation.
“The majority of Americans are not confident in their retirement options,” Barrett said. “It also appears that many do not seek professional help despite these concerns.”
In short
Confusion and fear that they might make a mistake when investing and saving for retirement keep many working men and women from moving forward with their retirement planning. Many experts advise people to simply get started with a workplace retirement plan or a traditional IRA, noting that the worst thing employees can do about their retirement planning is nothing.
Tips about retirement
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A financial advisor can help you answer all your questions about retirement options. Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your area, and you can have a free introductory meeting with your advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Try SmartAsset’s retirement calculator to gauge your retirement readiness. This free tool estimates how much you will have left when it’s time to retire.
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Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not at risk of significant fluctuations like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But with a high-interest account, you can earn compound interest. Compare savings accounts from these banks.
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