Many Americans Are Not Financially or Emotionally Prepared for Retirement According to New Schwab Survey

Now is the Time to Take Action and Get Retirement Back on Track

Thursday, June 4, 2009 5:00 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NASDAQ:
SCHW

SAN FRANCISCO--(BUSINESS WIRE)--The third Real Life Retirement quarterly pulse survey by Charles Schwab shows the recent economic downturn has not spurred Americans to change behaviors regarding retirement preparation. Almost four in 10 Americans (39 percent) are not currently saving for retirement and, despite market losses, six in 10 Americans (62 percent) have not adjusted their thinking about what age they will retire – nearly unchanged from the first pulse survey in September 2008, months before the recession was officially declared.

“Americans may be feeling a lack of control over their retirement which has led to inaction, when in fact this is an ideal time to act,” said Mark Jamison, vice president at Charles Schwab. “Now is the time to reevaluate your financial circumstances. Whether that means delaying retirement or adjusting how much you save for retirement, making changes now can lead to a significant difference in the future.”

Survey respondents estimate they will need just over $1.2 million to comfortably retire, yet those currently saving for retirement have put away an average of $194,000. Despite this awareness, 41 percent of Americans feel positively about their retirement preparedness and another 22 percent feel indifferent.

An Action Gap Among Those Close to Retiring

A deeper look at those closest to retirement (ages 55-63) shows a gap between planning and reality, as thirty percent used “contentment” to describe their retirement preparedness despite insufficient funds. Fifty-one percent of 55-63 year olds surveyed have saved less than $500,000, though they most commonly believe they will need $2,000,000 to retire comfortably. To help bridge the $1,500,000 gap, 52 percent of this group are thinking they will retire later than planned, while 47 percent report they have not changed their thinking about retirement.

“Bridging the retirement gap is top of mind for many people making the transition toward retirement,” said Jamison. “Taking concrete steps to make sure your savings can support your retirement should be priority number one, especially for those closest to their target retirement age,” he added.

How to Bridge the Gap

The reality for many is that achieving the desired retirement will require pulling multiple levers, including saving more, managing expenses, and working longer. Take for example a hypothetical 60-year old who looks like the average person taking the survey. This 60-year old has $500,000 in savings, thinks they need approximately $2,000,000 for retirement (presuming they want to spend $100,000 in retirement per year and are saving $15,000 annually), and would like to retire at 65, what are their options? If delaying retirement was the only lever they’d be willing to pull, their options would be: putting off retirement by 11 years, saving almost $200,000 per year, or cutting their expenses in half. If they’d be willing to pull several levers – such as reducing retirement spending to $80,000 and increase their savings an additional $15 thousand a year, they would only have to reduce their retirement by six years.

Younger Investors — Indifference Leading to Inaction

Of respondents 18-34 years-old, 35 percent feel “indifferent” when it comes to their retirement preparedness, with 11 percent citing “fear” and another 9 percent responding with “anxiety.” Almost three in four (73 percent) assert that, despite the economy, they haven’t changed their thinking about when they will retire. Additionally, nearly six in 10 (59 percent) of those 18-34 years-old confess they are not currently saving for retirement. Among savers, an average of just $23,000 has been set aside for retirement purposes.

“This is a learning opportunity for Americans of all ages - and younger investors in particular have a great opportunity to understand some key investing principles like the power of compounding. For example, if a 30-year old with $25,000 in savings commits to saving $6,000 per year, that translates into $2M saved for retirement by the time they reach 65, based on a hypothetical 9.7% rate of return,” said Jamison. “On the other hand, older generations may need to come to terms with the fact that their retirement goals may need recalibration. As safety nets slip away, golden years can only shine if retirement planning is put into high gear.”

Additional Findings

  • Just one-third of survey respondents (32 percent) currently plan to retire later than planned, down from almost half (49 percent) in September 2008.
  • Of survey respondents who are already partially or fully retired, 15 percent expect to return to work on a part- or full-time basis.
  • On average, men report more in retirement savings than women ($234,500 vs. $136,800).

For More Information

Charles Schwab Real Life Retirement Services provides a realistic approach to retirement, not only offering key insight into actionable ways to save for and manage retirement savings, but also providing guidance on products and services and access to stories from Americans who are nearing or are in retirement. For more information please visit, www.schwab.com/RealLifeRetirement.

About the Study

The Charles Schwab Q2 Retirement Omnibus Survey was conducted by Kelton Research between April 13th and April 20th, 2009 using Random Digit Dialing of listed and unlisted numbers. Quotas are set to ensure reliable and accurate representation of the total U.S. population ages 18 and over. Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. In this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.5 million client brokerage accounts, 1.5 million corporate retirement plan participants, 544,000 banking accounts, and $1.2 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (0509-9284)

Contact:

Charles Schwab
Matt Hurwitz, 415-667-0480
matt.hurwitz@schwab.com
or
Edelman
Jennifer McClellan, 212-704-4567
jennifer.mcclellan@edelman.com

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