By Jamison Cocklin
Financial uncertainty continues to impact retirement plans for many Americans.
To what extent largely depends on income levels. In any case, retirement planning doesn’t have to be daunting.
Earlier this month, Pittsburgh-based PNC Financial Services released a report showing that 64 percent of Americans between the ages of 35 and 70 with $100,000 or more in retirement assets, say they are on target or ahead of their retirement planning goals. The survey sampled 1,038 respondents.
Another report, released in March by the Employee Benefit Research Institute, showed only 19 percent of all workers surveyed said they were doing a “good job of preparing financially for retirement.”
Furthermore, of the 1,000 surveyed in the report, 42 percent of respondents identified job uncertainty as the most-pressing financial concern facing most Americans.
“A lot of them are really scared. They don’t see their assets standing up to what they see in the media and their day-to-day lives,” said Daniel Rossi, president of FEIC Financial, a wealth- management firm in downtown Youngstown, referring to local retirees and other workers who come in with plans for retirement. “These are the things they’re basing their decisions on.”
Indeed, the financial risks surrounding retirement have escalated in recent years. Longer life-expectancies, low interest rates, volatile global markets and ever-increasing health-care costs have tripped up retirement plans or forged shortfalls in the current spending plans of retirees.
Pushing retirement issues to the front this week were the Ohio House and Senate, which Wednesday overwhelmingly approved changes to the state’s five public-employee pension systems.
Although publicly funded retirement plans differ from those offered in the private sector, workers at all income levels and across various industries need to prepare for retirement early.
“It’s simply a failure to address retirement on an annual basis with an adviser or on you own — you have to make sure you’re on track,” said Karen Segesto, a Youngstown-based relationship manager with PNC Wealth Management.
Being prepared, Segesto said, is not about a specific savings goal, but rather, it’s about having a strategy for retirement. Each individual will have different demands, spending habits, debt levels or objectives for leaving the next generation money, she said.
The Employee Benefit Research Institute found that Americans mainly save for retirement through an employer-sponsored plan, such as a 401k. The institute found that 38 percent of all workers say they contribute to such plans, while 72 percent of respondents in the PNC report said they invest as much as they can through their employer-based retirement account.
Still, much of the private sector has shifted from company-funded pensions to cost-sharing mechanisms such as a 401k, which allow employees to defer their income by contributing up to $17,000 per year with up to 6 percent matched by an employer.
This is a start, Segesto said. But employees will need a better guarantee than the smaller returns offered by a 401k.
Next, advisers recommend considering a greater life expectancy and rising health-care costs. For retirees, this means spending about 4 percent annually from their retirement savings to help ensure longevity. For most, conservative portfolio investments aimed at fixed growth can also help whatever savings they have on hand.
In most instances, Segesto said rather than chasing returns on high-yield stocks, money market funds, treasury notes or other fixed-rate investments help protect a portfolio’s principle against risk.
“My best advice is starting with an employer and saving with a 401k plan,” Segesto said.
“In the event they don’t offer one, work with an investment adviser to set up an IRA and contribute very small amounts on a monthly basis. It’s never to early to start saving for retirement.”