However, even with this decreased spending, more than half (51%) of the general public and 40 percent of affluent Americans are also saving less than they were three months ago - with approximately one in five citing that they're saving "much less."
The survey, conducted by Braun Research, sampled the general public and "affluent Americans," identified as individuals with investable assets between $100,000 and $3 million. Initial findings underscore how deeply troubled Americans are about their retirement savings and financial well-being, with close to one quarter (23%) of respondents indicating that the 'impact of economic turbulence on their retirement savings' is the financial issue that concerns them most.
"Today's economic conditions are clearly having a significant impact on Americans' near-term financial behavior, causing many to be or to believe they are in a less secure position to work toward their long-term retirement goals," said Craig Averill, personal retirement solutions executive for Bank of America. "Based on this survey, it appears that many Americans are not fully able to save what is needed to retire as they had planned, and some are tapping into their nest eggs to meet more immediate financial needs."
Although the majority of respondents with at least one retirement account say that they have not withdrawn assets from their account(s) prematurely (68%), recent economic conditions have caused nearly one in five (18%) to withdraw assets prematurely. The leading reasons for these early withdrawals are near-term financial obligations, such as credit card debt (26%) and mortgage payments (22%), with an additional 22 percent citing recent job loss.
If the economy continues to worsen, these numbers may increase significantly. The possibility of many more Americans dipping into their retirement savings could have profound implications for the country's future economic well-being.
Golden Years Diminish as Careers Extend
In light of recent economic turbulence, many Americans (43%) believe they now face more years in the work force than they expected to one year ago. This will clearly affect Baby Boomers the most, or those approaching retirement who may not have time to recover the financial losses incurred during recent months. For this reason, it is not surprising that more than one third (36%) of affluent respondents said current economic conditions have pushed back their expected retirement age.
According to responses to a Bank of America Retirement survey conducted earlier this year (March 2008), 53 percent of the general public and 36 percent of affluent Americans were either behind schedule or had not started their retirement planning efforts. Comparatively, according to findings from this latest survey, conducted in November 2008, 62 percent of the general public and closer to half (44%) of affluent Americans are either behind schedule or have not started their retirement planning efforts - indicating that Americans are getting increasingly off-track when it comes to planning for their financial futures.
Need for Proper Retirement Planning and Guidance Persists
Despite recent market turmoil, more than two-thirds (68%) of respondents have not changed the way they save, invest or manage their retirement assets in the last three months.
"Lack of change in the way people are saving and investing for retirement may indicate that they're 'staying the course,' with confidence in their long- term financial plans and investments," adds Averill. "However, this lack of change could also be a sign of Americans not knowing exactly what to do besides reduce spending and continue to watch as their retirement assets diminish."
This survey further confirms that Americans need better guidance and education regarding how best to plan for retirement and manage their retirement assets. In fact, 59 percent of the general public and more than half (52%) of affluent Americans don't know or don't have a good idea of how much they'll need to save in order to maintain their current standard of living in retirement, according to this survey.
According to these findings, nearly half (47%) of retired Americans currently do not believe or are unsure if their retirement assets will cover their financial needs throughout their lifetime. Despite these findings, more than four in ten (42%) Americans do not work with a financial professional, indicating that many individuals may not be receiving the financial guidance necessary to fully realize the opportunities that retirement presents.
Take Inventory of Retirement Assets
Funding an employer-sponsored savings plan, such as a 401(k) or 403(b) plan, is a first step for retirement planning. When individuals move from company to company they often face the decision of whether to leave their money in a retirement plan sponsored by their previous employer, to roll over assets into a plan sponsored by their new employer, or to roll them over into an Individual Retirement Account (IRA).
According to this survey, one quarter (25%) of the general public and one- third (33%) of affluent Americans still have at least one 401(k) or 403(b) plan with a former employer. Of those who have a plan with a former employer, close to half (48% general public, 46% affluent) intend to keep their assets in the existing plan.
"There can be a number of advantages to rolling retirement accounts, such as a 401(k) or 403(b), into an IRA," said Averill. "For instance, with a Rollover IRA, individuals can consolidate plans from former employers for easier management of retirement assets over time. Rollover IRAs also allow individuals to maintain their retirement accounts' tax-deferred status, often expand investment choices, and offer more flexible and often penalty-free withdrawal options at various life stages - particularly those near or in retirement."
