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Retirement Plan Participants Unsure of Future Needs

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Harrison, N.Y. (August 7, 2012)

By Michael Cohn

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 percent said they consulted with a professional for help in setting their goals.

The survey, by retirement plan administrator Diversified, found that 69 percent 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 percent made at least $75,000 annually), more than half (54 percent) said they had less than $100,000 saved for retirement. What’s worse, 37 percent had less than $50,000 saved. Only 3 percent said they had saved $1 million or more.

Sixty-one percent said they were saving 10 percent or less of their annual salary in their defined contribution plan, with 25 percent saying they were saving 5 percent or less. Only 19 percent said they were contributing significant funds to their retirement accounts, saving more than 15 percent 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 percent. 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 percent saying they took a hardship withdrawal.

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