Personal Finance: Planning the long hike toward retirement

Many eventual retirees actually save enough, while many others only feel that they save enough. Still others lag and fall far behind on the long trek of retirement planning.

Mark Twain claimed British statesman Benjamin Disraeli said there are three kinds of untruths: “Lies, damn lies and statistics.” As a lifelong personal finance junkie, I admit, yes, some statistics are distractions.

Other stats put our financial progress in stark perspective.

For example, 61 percent of respondents to a recent study by financial education provider Financial Finesse said they’ve never run a retirement calculation.

Have you heard about the folks who hike the nearly 2,200-mile Appalachian Trail end to end? Imagine if 61 percent of them ventured forth with no compass, no idea how long the trip would take or how much food they needed, and wearing only a single pair of sneakers. A little crazy, right?

The road to retirement, a similar long-haul hike, requires thorough planning.

Meanwhile, the Finesse study suggests most Americans are starting out blind, beyond unprepared, and with no knowledge of how or why to prepare.

“We’re … very concerned about millennials, women and lower-income employees, who are the demographics we see at highest risk for not achieving retirement security,” said Liz Davidson, Finesse chief executive.

Consider these findings from the survey:

▪ Though 20 percent of respondents felt right on track with their retirement preparation, 80 percent didn’t. The bulk of the unprepared folks are young, female or both.

▪ Millennials lost ground in terms of preparedness, with just 17 percent saying they’re prepared (the figure was 19 percent in an earlier survey), despite almost 9 out of 10 of them being enrolled in employer-sponsored retirement programs (automatic enrollees of all types generally contribute less to their plans, 3.5 percent to 4.4 percent compared with 7 percent for active enrollees). Experts recommend contributions between 10 percent and 15 percent to adequately fund a retirement account.

“We view them as a lost generation disconnected from the retirement-planning process,” Davidson writes. “Of all the generations, they are the least likely to be on track to reach their income-replacement target in retirement despite (having) a lot more time for their money to grow.”

▪ Retirement preparedness among women rose to 17 percent from 13 percent, but that number still lags 9 percentage points behind men. Women face much stronger financial headwinds than men, making it even harder and more important for them to adopt a retirement strategy. Davidson also notes that, on average, women contribute about 6.9 percent of their pay into retirement savings and maintain an average retirement plan balance of less than $60,000.

If numbers fail to paint the picture for you, let’s go back to walking the Appalachians. You need a guidebook or map. If you are young, female, below your income potential or any combination of the three, take a map, take a book and take a hard look at how retirement planning means planning a long hike.

This story was originally published November 18, 2015 at 9:00 AM with the headline "Personal Finance: Planning the long hike toward retirement."