More than a third of retirement plan participants admitted that they either “guessed” or “made up” their estimates for how much income they would need in retirement, according to a new survey, while only 30% said they consulted with a professional for help in setting their goals.
The survey, by retirement plan administrator Diversified, found that 69% of the 3,370 defined contribution plan participants polled admitted that their DC plan at work was their only or primary retirement account. Despite the fact that the vast majority surveyed were at least middle-aged (68 percent said they were 46 years old or older) with a reasonable income (64% made at least $75,000 annually), more than half (54%) said they had less than $100,000 saved for retirement. What’s worse, 37% had less than $50,000 saved. Only 3% said they had saved $1 million or more.
Sixty-one percent said they were saving 10% or less of their annual salary in their defined contribution plan, with 25% saying they were saving 5% or less. Only 19% said they were contributing significant funds to their retirement accounts, saving more than 15% annually.
“That’s not enough,” said Diversified senior vice president of participant solutions Patricia Advaney in a statement. “Participants need to be saving a minimum of 10%. While some may view it as a sacrifice now, they’ll undoubtedly be grateful when they realize it will prevent an even greater sacrifice in retirement.”
Thirty-eight percent of defined contribution plan participants reported that they had increased the amount of money they are saving for retirement this year over last year. Eleven percent took a loan against their DC plan over the past 12 months, with 3% saying they took a hardship withdrawal.
Michael Cohn is the editor in chief of Accounting Today, a SourceMedia publication.
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