Two in five (42%) Americans report feeling on track for retirement – significantly more than those who felt this way last year (only 37%), and in any other year since the index began in 2010, according to the New Retirement Mindscape 2013 City Pulseindex, an annual retirement readiness index released by Ameriprise Financial.
However, financial preparation for this milestone is still subpar, and pending healthcare changes are weighing on the minds of many of these consumers.
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The study examines the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement. The index has also served as a barometer for national and local retirement trends.
Metropolitan areas are scored based on responses to a national survey that measure consumers’ likelihood to have determined the amount of money they need to save for retirement and their actual saving habits. The index also takes into account the attitudes and level of confidence locals express about this milestone. The study was conducted online by Harris Interactive in June among 10,045 U.S. retired and non-retired adults ages 40-75.
Morale is high but doesn’t reflect increased preparation
The large majority of Americans are smiling when they think about retirement. More of these Americans than ever (67%) say that retirement makes them feel emotionally positive. They most commonly report feeling happy (47%), optimistic (38%) and hopeful (34%). Seventeen percent even say retirement makes them feel empowered.
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By GlobalDataMore than ever, respondents say they feel on track for this milestone, with one in five (19%) saying they feel very prepared financially for retirement or the remainder of retirement and 28% feel very confident they’ll reach their retirement goals or that the remainder of their retirement will work out as planned.
Although nearly three in four (72%) admit having taken some action to prepare for retirement, this number is smaller than in 2011 and 2010 (75% and 74%, respectively) when the economic recovery was still shaky. When it comes to saving, more than half (51%) report contributing to a 401(k) or other retirement plan which represents a significant jump from last year (47%) but is still fewer than those who said they were saving into this kind of plan two or three years ago. Adding to these underwhelming numbers is that only half (49%) of respondents say their retirement account balances have recovered from the market downturn in 2008-2009. On the bright side, nearly one in four (23%) say they have determined the amount of money they need to save for retirement – significantly more than in any other year.
Detroit surprisingly more retirement-ready than nearly all other metros
The city of Detroit (#2) is experiencing the consequences of an unrealistic balance sheet, but it appears Detroit area residents are taking note and learning from the municipality’s troubles. Sending it to the second spot on the index this year is the fact that respondents from the Detroit area are much more likely than average Americans (56% vs. 48%) to have contributed to personal retirement accounts (other than employer-sponsored accounts). They were also significantly more likely than their peers in other metro areas to have a written financial plan (17% vs. 11%) and to work with a financial advisor (38% vs. 29%).
Three-fourths (77%) of Bay Area residents say they’ve taken at least some steps to prepare for retirement, slightly ahead of 72% nationally. And the higher preparation levels have impacted the local confidence levels; one-third (35%) agree that they will achieve their dreams while in retirement – much more than the national average (24%) and a steady increase since 2010 when only 20% of locals believed they would achieve their dreams in retirement.
As for those in the bottom three metro areas, while they are generally on par with other Americans in their retirement preparation, respondents are slightly less likely this year than last to say they think they will reach their retirement goals. In Orlando (#30), three in ten (30%) locals report feeling worried about retiring and 12% even feel sad. This could be closely related to the fact that fewer locals than average in this Sunshine State metro admit that their retirement accounts have recovered from the market downturn (41% vs. 49%). Perhaps for this reason, only 35% of Orlando respondents say they feel on track for their retirement – the fewest in four years.
Consumers anticipate healthcare changes on eve of the Affordable Care Act
Nearly half (45%) of these Americans, however, think that providing for their healthcare expenses in retirement will be one of the most challenging financial issues after they leave the workforce.
Americans estimate needing a median of $100,000 in savings to help cover healthcare costs not covered by Medicare. This is not far from what retired individuals spent on average over the course of their retirement ($135,500 according to 2012 EBRI data), but is significantly less than the $227,000 experts predict individuals will spend on healthcare in retirement in 2020.
Only 13% say they’ve purchased long-term care insurance, however another 8% anticipate doing so in the next year. And though it’s not many, a startling one in ten (10%) expect family and friends to care for them in retirement if their health begins to fail.
Americans in this group are also thinking ahead to pending changes due to the Affordable Care Act. Two-thirds (68%) of Americans express concern, and half (51%) of those concerned say their top worry is that they will end up paying more for healthcare.
