Thursday, June 23, 2005
Study finds guaranteed retirement income desirable, but elusive, for many near retirees
(ARA) - A new study released by Prudential Financial, Inc. finds that Americans aged 55-64 overwhelmingly agree that having a guaranteed stream of income during retirement is their top goal, but the vast majority don't know how to convert their retirement savings into a regular retirement "paycheck," focusing instead on simply saving as much as they can.
According to the company's fourth annual Workplace Report on Retirement Planning, despite a nearly unanimous desire for a guaranteed retirement income -- as traditional pension plans provide -- few older American workers are aware of or plan to use financial options that provide the steady paycheck they say they want. The study confirms that older workers are actively saving for retirement, but few are aware of the income distribution options currently available. In short, near retirees simply do not know what to do with their retirement nest eggs once they stop working.
According to the survey, some 83 percent of near-retirees believe it is "very important" to generate an income that provides a comfortable retirement lifestyle. But barely 20 percent say they are well informed on how to do so. When asked if they would choose an income annuity to create a retirement paycheck -- the only option available to guarantee a stream of income that one cannot outlive -- fewer than half (44 percent) had even heard of the income annuity option, and just 9 percent said they would use it.
Moreover, only 15 percent of those surveyed are focused on "generating retirement income," while the remaining 85 percent are continuing to concentrate on "building their retirement nest egg" (approximately 41 percent); "preserving and protecting their savings" (approximately 23 percent); or "achieving better returns" (approximately 20 percent).
"Current industry data shows that American workers aren't saving enough in their workplace-provided retirement programs, and our survey indicates that this lack of preparedness extends from the accumulation phase of retirement planning into the distribution phase," said John Kim, president, Prudential Retirement. "Even those who are conscientious savers and investors, including Baby Boomers now aged 55 to 58, aren't prepared to convert their retirement savings into a predictable retirement paycheck that they can't outlive."
"This should be a 'wake-up call' to employers, to retirement-plan providers and to the nation as a whole that those nearing retirement need help in managing the payout phase of retirement, especially in light of current discussions on Social Security," Kim continued.
"The survey also underscores the need for better education -- targeted specifically to the needs of older workers -- on distribution options and strategies that deliver a predictable, guaranteed income in the increasingly do-it-yourself world of retirement planning. We need to work together to ensure that American workers have access to the tools and resources they need to build a more-secure retirement," Kim added.
In addition, the survey points to an unmet need among many Americans for assistance with retirement planning. Although near retirees acknowledged they must take personal responsibility for their retirement security, a mere seven percent have formal plans in place to help them manage such issues as generating income, identifying expenses, and utilizing savings.
More than one-third (34 percent) of those surveyed said they need assistance to understand products and concepts -- such as income annuities and systematic withdrawal strategies -- that can help generate the predictable retirement income they seek. And a large percentage (35 percent) have yet to calculate the savings they need for a comfortable retirement or what their projected monthly living expenses might be in retirement (36 percent).
Even more disturbing, when asked to give themselves a grade on their retirement preparedness, 53 percent awarded themselves a "C" or lower, casting grave doubt on the ability of older workers to "graduate" to a secure retirement. Other notable survey findings included:
* The majority (90 percent) of near retirees are either guessing how much income they would have or, even worse, simply do not have any idea of how much income they will be able to generate for themselves during retirement.
* Although retirement for many Americans is imminent, more than six in ten near-retirees still focus on accumulating assets or achieving better returns instead of planning on how to generate a steady stream of retirement income.
* Too often, near-retirees simply "do the best I can" with retirement planning, instead of focusing on specific, retirement-critical goals such as a targeted level of income.
* Nine in 10 near-retirees agree it is "very important" not to run out of money in retirement. This concern, however, may lead to "hoarding." Just 22 percent say they would tap into their savings for income early on in retirement, while most would try to hold on to their assets for as long as they could.
Courtesy of ARA Content
Saturday, June 11, 2005
(ARA) - For most couples, the time between getting engaged and celebrating the big day is a whirlwind filled with a myriad of details that need lots of personal attention: booking the wedding location, recruiting members of the wedding party, organizing the reception - the list goes on and on.
In all the excitement and activity, one thing that may get overlooked is discussing who is paying for everything and how it will be financed. The typical wedding costs between $20,000 and $25,000. "Most people won't be paying for their weddings entirely with cash," says Maxine Sweet of Experian, a company that provides consumers with products and resources to help them understand, manage, and protect their personal credit profiles. "Whether the bride and groom are paying for the wedding themselves, or their families are picking up the tab, chances are at least some of the wedding expenses will be put on a credit card." There may be the need to spread the expense over time, or it could simply be because of the convenience of using credit for phone orders or remote contracts.
Figuring out how to pay for the wedding gives couples an opportunity to discuss their feelings toward money in general and more specifically, how they feel about using credit. These are issues that may not have come up previously, since each individual was handling their own money. A good way for couples to start dialogue on these issues is by looking at their credit reports.
Web sites like www.Experian.com give you quick and easy access to your credit report and credit score to learn what positive and negative factors are affecting your credit. Each of you should obtain a copy of your credit report and then spend scheduled time reviewing them with your spouse-to-be.
Check pertinent information such as your name, previous and current addresses, Social Security number and account details. If you find any inconsistencies in your report, you need to report them and correct the information. Once you've covered these basics, review your partner's credit report for clues on how they deal with money and credit.
For example, if your significant other has a history of late payments, that could indicate a problem managing money or that they're overextended. Or it could simply highlight a devil-may-care attitude toward paying interest and late fees. Either way, it is important for both of you to agree on using and handling credit, because your access to new credit and to better interest rates very likely will be affected by your spouse's credit behavior and vice versa.
You'll also discover whether your partner prefers to pay credit card debt off in full each month or pay only the minimum fee. You'll want to commit to staying well below the limits to demonstrate strong credit management skills. If a large portion of your income each month is already committed to paying off other debt, future lenders may wonder if you will have trouble paying back an additional loan. You want to protect the privilege of using credit for all the benefits it brings, including monthly statements that make it easier for the two of you to monitor all your transactions every month and manage your expenses.
Before you justify using your credit cards to finance the perfect wedding, keep in mind that those pending balances could be with you for a long time. While you may not want to settle for a less expensive wedding gown, or a less exotic honeymoon trip, just remember it will be even more expensive when you tack on the interest charges that will add up before you pay it off. Have a definite plan for how and when all of it will be paid. "If at all possible, you don't want to begin your married life burdened by debt and arguing about money," says Sweet.
Taking control of your spending now will also make it easier to save for your future - new furniture, a special trip for your 10th anniversary or (gulp) college tuition for your kids. And having your credit report up-to-date and in order means that when you need to apply for a car loan or a mortgage, you'll know that your credit history is in good shape.
For more information on checking your credit report, visit www.Experian.com.
Courtesy of ARA Content
