Derailed! Why Your Finances Have Fallen and Can't Get Up

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In the wake of the market meltdown that began nearly five years ago, a huge bull market in stocks has helped rescue many retirement investors from the brink of ruin. Yet even with the support of the stock market, many Americans still report big losses in their retirement savings -- we're talking six-figure declines -- and they're blaming unanticipated life events that have affected their ability to achieve their financial goals for retirement.

Major unexpected events have hit 90 percent of Americans between the ages of 50 and 70 with at least $100,000 in investable and retirement assets, according to the Retirement Derailers survey from Ameriprise Financial.

The survey found that typical respondents suffered an average of four such "derailers," and the cost was substantial, causing total average losses of $117,000. For the 37 percent of respondents who said they went through five events, the total losses were even larger, averaging $144,000.

Given the stock market's huge plunge in 2008 and early 2009, you might expect that it would be the most commonly cited derailing event. But surprisingly, the most common derailer was the low interest rate environment, with 63 percent of those surveyed blaming low rates in hampering retirement-portfolio growth. Another 55 percent pointed to the stock market's decline, while 33 percent cited the plunge in home prices as wiping out a big chunk of their expected home equity.

Yet market forces weren't solely to blame for financial difficulties. Job loss hit 18 percent of those surveyed, while 23 percent point to the need to support adult children or grandchildren as hampering their finances.

Are Boomers In Denial?

As troubling as those figures are, what could be even more problematic is the extent to which Americans don't fully realize the impact that major losses will have on their retirement.

Only 35 percent believe that derailers will hurt their capacity to pay essential living expenses a lot or a fair amount. It takes several major disruptive events to get the point across, as 60 percent of those who dealt with five or more derailers expected greater difficulty in paying for essentials.

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Moreover, American baby-boomers don't seem to understand the importance of actually staying on pace to achieve the goals they've set for their retirement finances.

More than 60 percent still think they're on a "smooth" road to retirement rather than a "bumpy" one. Yet, 42 percent say that their investment portfolios have left them with less than they expected 10 years ago to have by now, and more than 55 percent of those who've suffered an unexpected event describe the impact it has had on their finances as extremely serious or somewhat serious.

Lessons For the Future

The Baby Boomers surveyed here haven't given up hope and they plan to take action on their own to help get their finances in better shape.

But what future generations can take from Boomers' opinions is the lesson that paying attention to your money earlier in life can make a big difference in how your finances look by the time you approach retirement.

In particular, 57 percent said that they would have started saving earlier if they'd known how difficult it would be to handle unexpected financial challenges. Another 37 percent think that knowing more about investing at an early age would have helped them avoid their current fate, while 33 percent pointed to overspending on vacations and restaurants as contributing to their woes.

It's never too late to start working to get yourself in better financial shape. For those who have already retired, adjusting the investments you already have to make better use of income and growth opportunities can help you stretch your portfolio as far as it'll go. Boomers who are still working have an chance to boost their savings and take advantage of the final years of their career to try to get back on track.

Still, the sooner you get a grip on your finances, the easier it is to get yourself where you want to be by the time you retire. The Ameriprise survey is just one more piece of evidence showing how important it is plan for your future as early as you can.