February 2008
Savings secrets
What exactly did the retirees do right? For one thing, they put money aside in a variety of vehicles toward the eventual day.
When we asked them how they had gone about it, here's what they said:
All of those are smart moves, in our view, with one possible caveat. Given the current state of the housing market, individuals
planning for retirement today will probably not want to count on their homes being the cash machines they've been for preceding
generations.
However, the broader lesson here, of saving through a variety of vehicles, is a solid one. In general, the more ways that our readers told us they saved, the more likely they were to be satisfied with their retirement.
Smaller percentages of readers told us they had saved for retirement via a whole-life insurance policy, an annuity, or gold or other precious metals. We agree with the majority there; none of those should represent a substantial part of a person's retirement savings in most cases.
As to when they started saving seriously for retirement, 32 percent told us they'd begun in their 30s, while 34 percent had waited until their 40s. A precocious few (15 percent) had started in their 20s. Only 11 percent had put it off until their 50s and 1 percent until their 60s. Seven percent told us they had never seriously saved. Perhaps not surprisingly, the sooner the person had started to save, the more satisfied he or she was with retirement.
One difference that's often cited between today's generation of retirees and tomorrow's is that the former group is more likely to have money coming in from a defined-benefit pension, the kind that is typically funded by an employer and pays a regular monthly benefit during retirement. Such pensions have been disappearing in recent years, as many employers abandoned them in favor of defined contribution plans, such as 401(k)s, which shift more of the burden of saving to the employee. Our survey found scant evidence of that so far. Among the retirees, 55 percent reported receiving money from a defined-benefit pension. Among the still-working full-timers, 53 percent said they had a defined-benefit plan with their current employer.
- 67 percent had participated in a 401(k) or 403(b) plan at work.
- 60 percent had an IRA.
- 59 percent had built up equity in their homes.
- 43 percent owned stock outside of a retirement account.
- 38 percent owned mutual funds outside of a retirement account.
- 37 percent had a savings account or CD.
However, the broader lesson here, of saving through a variety of vehicles, is a solid one. In general, the more ways that our readers told us they saved, the more likely they were to be satisfied with their retirement.
Smaller percentages of readers told us they had saved for retirement via a whole-life insurance policy, an annuity, or gold or other precious metals. We agree with the majority there; none of those should represent a substantial part of a person's retirement savings in most cases.
As to when they started saving seriously for retirement, 32 percent told us they'd begun in their 30s, while 34 percent had waited until their 40s. A precocious few (15 percent) had started in their 20s. Only 11 percent had put it off until their 50s and 1 percent until their 60s. Seven percent told us they had never seriously saved. Perhaps not surprisingly, the sooner the person had started to save, the more satisfied he or she was with retirement.
One difference that's often cited between today's generation of retirees and tomorrow's is that the former group is more likely to have money coming in from a defined-benefit pension, the kind that is typically funded by an employer and pays a regular monthly benefit during retirement. Such pensions have been disappearing in recent years, as many employers abandoned them in favor of defined contribution plans, such as 401(k)s, which shift more of the burden of saving to the employee. Our survey found scant evidence of that so far. Among the retirees, 55 percent reported receiving money from a defined-benefit pension. Among the still-working full-timers, 53 percent said they had a defined-benefit plan with their current employer.
