Just five years after the onset of the financial crisis, Americans’ confidence about retirement appears to be rising with the strengthening economy. Yet the steps people are taking to prepare financially for this milestone has remained relatively unchanged over the past for years. According to the New Retirement Mindscape® 2013 City Pulse index, two in five (42%) Americans report feeling on track for retirement which is significantly more than those who felt this way last year (only 37%), and in any other year since the index began in 2010.
But while confidence soars, the lack of action being taken by consumers to prepare for retirement just isn’t adding up. While nearly three in four (72%) admit having taken some action to prepare for retirement, this number is smaller than in 2011 and 2010 when the economic recovery was still unstable.
The annual New Retirement Mindscape City Pulse index examines the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement. The index has also served as a barometer for national and local retirement trends.
Preparing for retirement is even more important in the face of potential challenges like affording healthcare. Funding healthcare costs now and in the future is proving to be a financial concern for many consumers; nearly half (45%) of Americans think that providing for their healthcare expenses in retirement will be one of the most challenging financial issues during retirement. Likewise, two-thirds (68%) of Americans express concern about the pending changes due to the Affordable Care Act, and half (51%) of those concerned say their top worry is that they will end up paying more for healthcare.
Of the 30 largest US metros, at the top this year are San Francisco-Oakland-San Jose (#1), Detroit (#2) and Hartford-New Haven (#3), as the most confident and prepared. There are a few things that set these cities apart from less retirement-ready areas; if you’re preparing for retirement, take note of the following factors that can help you feel more prepared for and confident about retirement:
• Contribute to retirement accounts beyond a workplace-sponsored plan. More residents than average in the top three cities have contributed to IRAs or other personal investment accounts (other than or in addition to workplace-sponsored plans). There is great value in making regular financial contributions to these types of accounts and saving as much as possible. Having more money in savings and maintaining a diversified portfolio that includes different kinds of investments will likely make you feel more confident about your ability to afford the things you need and want after you leave the workforce. You may also have more control over your personal accounts as you do in an employer-sponsored plan, and withdrawals typically carry fewer penalties – though it’s important to avoid withdrawing from you retirement savings accounts if possible.
• Maintain positive feelings about retirement. Unfortunately there are many things you don’t have control over, including the markets and other factors that make the national economy fluctuate. However, you can influence how you respond to financial ups and downs – economic, personal or otherwise. Respondents in two of the top three cities were far more likely than the national average to say that thinking about retirement makes them feel empowered. Thinking positively about the future – and acting on those feelings by taking proactive steps to prepare – is key to helping build retirement confidence.
• Consider working with a financial professional. Residents in two of the three most retirement-ready cities were more likely to work with a financial advisor compared to the national average, which may contribute to their feelings of confidence and preparedness for retirement. The national survey results uncovered that only one in four (23%) Americans say they have determined the amount of money they need to save for retirement and even fewer (11%) report having a written financial plan. A financial advisor can help you determine how to define and work toward your retirement goals, and encourage you to take the right steps to proactively prepare for this milestone.