Retirement Savers Are Losing Ground - and It's Their Own Fault

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By Brian O'Connell

NEW YORK -- Way too many U.S. retirement savers believe they're seeing light at the end of the tunnel with their savings funds, but more likely, that light is coming from a speeding, oncoming train.

Too much hyperbole? Not really -- not when only 43 percent of Americans have put "some thought" into their retirement and 38% have not thought about it at all, according to fresh data from BMO Harris.

More bad news on the retirement front. Even though BMO reports that three-fourths of non-retirees under 60 are utilizing a 401(k) or IRA account, signs are abundant that retirement investors are under-invested in their "Golden Years" portfolios. What's more, more than half don't know how much they will need in retirement. To boot, only 19 percent of Americans under 60 have a "definite idea" what their retirement will look like.

%VIRTUAL-pullquote-There is one very simple reason that many Americans are under invested in retirement savings vehicles. They have no plan.%BMO Harris also surveyed current U.S. retirees, asking them what savings advice they'd give to the younger generation. Some 93% respondents strongly advised "opening a 401(k) and/or IRA account as soon as possible and making regular contributions."

"We're seeing that today's retirees are satisfied with their retirement lifestyle -- what they have learned with the retirement planning process can serve as a model for future generations as they plan for their golden years," notes Stuart Thompson, head of premier banking strategy at BMO Harris Bank. "The notion of an 'ideal retirement' changes with each generation."

Even so, with so many U.S. workers uncertain, or under-invested in their retirement accounts, the big question is: why?

"There is one very simple reason that many Americans are under invested in retirement savings vehicles," says Dennis M. Breier, president of Fairwater Wealth Management in Downers Grove, Illinois. "They have no plan." If the average American investing in a retirement vehicle had a plan and definite strategy, there is no possible he they could be underinvested, Breier states.

For example, if a 42-year-old set a goal to retire at 60 with a $100,000 annual income all the way to age 90, a solid financial plan would give them following information:
  1. How much he has to accumulate to reach the goal.
  2. What the rate of return needs to be to get there.
  3. How much money needs to be placed in the accounts per month assuming some rate of return.
"While there are other factors that go into planning, these are the basics," he says. "Given this information it is impossible to underfund a retirement plan unless the person has no plan or they are not very serious about reaching their goal."

Another reason why Americans are under-invested and struggling with their retirement plans is a demographic one, and an avoidable one, at that.

"When people are young, which is the best time to start saving for retirement, they either don't understand the value of starting early -- especially the value of compound interest -- or they don't feel like they can spare the money," says Corey Hinds, a financial adviser with APS Wealth Management, in Camp Hill, Pennsylvania. "It's a hard sell to a 20-something where they should squeeze their belt even tighter so that they can have money decades in the future. But later on down the road when they realize they should have been saving, it's often too late."

Another reason for the meager retirement prospects: U.S. workers just don't feel like they have enough cash to plow into a retirement fund, and when they do, investment firms eat up the profits with high fees, notes Joshua Belanger, founder of the options trading site,

"Still, I see this as a silver lining, because everyday investors shouldn't be investing into retirement accounts they can't touch and only provide long-only investment options so firms can collect their fees," Belanger says. "They should be putting it into a normal account they can manage themselves."

For retirement savers who do get ahead, the rules of the road are simple.

"My husband and I are retirement savers and have approximately $500,000 in retirement accounts plus healthy regular investment accounts and a fully paid mortgage," says Julie Rains, a Chapel Hill, North Carolina-based personal finance writer and founder of the money management advice blog, "We started saving early when 401(k)s were first offered in the 1980s plus have roll-over IRAs, regular IRAs, RothIRA's, and other funds."

Rains notes that it can be a psychological game for people who are underinvested in retirement accounts to conduct a paradigm shift.

"One way to turn things around is to get excited again about retirement and start socking away more money - that's one way to get started," she said.

Sage advice indeed, if you're looking to take aggressive steps to play catch-up with your retirement savings. Just don't waste anymore time.
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