Americans dangerously underestimate how much money they’ll need in retirement, according to new research from J.P. Morgan. A white paper titled “Searching for Certainty” details the findings from an online survey conducted with more than 1,000 people with 401(k) plans. Participants reported wrestling with how to make their savings last through retirement.
Among respondents who had a target retirement income replacement level in mind, nearly half (45%) thought they would need less than 75% of their pre-retirement salary level. However, extensive J.P. Morgan research shows that a minimum guideline for successful retirement income is a replacement ratio of at least 70% or more.
Eighty-six percent of respondents said that they will need to know how much of their pre-retirement salary they can replace, yet almost one quarter (22%) aren’t even sure what they are on track to receive after they stop working. Overall, only 40% of respondents even feel comfortable that they will be able to reach their financial goals in retirement.
Related findings about the retirement income challenges facing Americans reveal:
· Two thirds of respondents admitted that they don't know how much they should be saving for retirement
· Nearly half of respondents are scared that they will outlive their retirement savings
· Of the participants who said they would need 75%-100% of their pre-retirement salary after they stop working, less than a third even had enough savings to provide this income.
Driven by the overhang of the recession, most Americans have pushed aside retirement savings priorities, which rank a distant second to paying monthly bills, according to J.P. Morgan. This is despite the fact that 401(k)s are the only or the primary source of retirement savings for two thirds of Americans.