Preparing for Retirement: Beyond Finances

While we tend to focus on the financial aspect of preparing for retirement, the Wall Street Journal (full article for subscribers only) talks about the emotional difficulties of shifting from career to retirement. Preparing for the psychological aspect of retirement is important – especially for those who define themselves by their jobs.

A majority workers may not give this much consideration because according to the Retirement Confidence Survey, approximately two-thirds of workers plan to continue working, at least part-time, during retirement. However only about 37% actually do. This has both a financial and psychological impact on retirees -- underscoring the need to approach preparing for retirement holistically.

Money Smart Week

Here at Praxiomatic, we're all about the financial literacy. As more and more financial responsibility for retirement and healthcare shifts from employers to employees, the importance of financial literacy for every American in every walk of life cannot be stressed highly enough.

That's why we're glad to see that next week is Money Smart Week in Chicago, hosted by the Federal Reserve Bank of Chicago and its partners.

This weeklong fair of financial education is being presented at financial institutions, not-for-profits, schools and libraries throughout the metro area — over 300 classes, seminars and activities in all (click the link above for a calendar).

Here are a couple of samples to whet your appetite:

Investing 101
Sponsored by Ariel Mutual Funds

Beat the Financial Squeeze: Caring for Both Children and Parents
Sponsored by Ameriprise Financial

Financial Planning for College
Sponsored by Primerica Financial

Getting Financially Organized
Sponsored by Financial Planning Association

Small Business Financial Workshop
Sponsored by Bank of America

Money Smart Week is a great way for financial institutions to reach into communities and help prove their commitment to the financial literacy of the customers they serve.

And on May 1, there will also be a Financial Literacy and Education Summit, a free two-hour webcast that features policymakers and financial education leaders.

Saving for Retirement

Preparing for retirement is a primary financial concern for most Americans. And while according to the 2007 EBRI Retirement Confidence Survey, 66% feel they have are saving enough, only 43% have actually done the math. That begs the question, how can you be prepared if you don’t know what you’re preparing for?

The Wall Street Journal estimates 20% to 30% of eligible Americans don't participate in their company's 401(k) plan. Those that do often make mistakes that could jeopardize their retirement security, such as investing too conservatively or contributing too little.

The growing concern over inadequate retirement planning has prompted employers to step up to help investors save by automatically enrolling employees in the company’s plan. Employees are allowed to opt out of such employer-directed moves. But few do, and that means employers' actions can dramatically change how workers' savings are invested.

While this may help some of the least prepared investors, these actions don’t do much for investors who are blindly saving. New education and coaching tools are necessary to help investors get on track and stay there.

EBRI

Employers Grab the Reins of Workers 401(k)s (for WSJ subscribers)

Retirement: Confident Enough?

The Employee Benefit Research Institute published its 2007 Retirement Confidence Survey, leading to a number of interesting observations:

• Workers are slow to adapt to a changing U.S. retirement system
• Half of workers are less confident about pension benefits
• Many workers are counting on benefits that won’t be there
• Many workers are unlikely to heed advice even if they get it
• Americans overestimate long-term care coverage
• Most savings levels are modest
• Continued ignorance about Social Security coverage

The situation isn't just bad — it's very, very bad: Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000.

The majority of workers who have not put money aside for retirement have little in savings at all: Seven in 10 of these workers say their assets total less than $10,000.

There is an ongoing educational crisis in the American retirement industry — and both institutions and advisors must step up to the plate with new ideas and new resources.