If knowledge is power, many retirement savers in America are feeling pretty powerless.
Half of people in their mid-40s to late 50s saving for retirement don’t know how their money is divvied up between stocks, bonds and cash, according to a survey released on Thursday by Schroders.
That was true even for respondents between the ages of 60 and 67, a time when retirement is near, if not imminent. When broken out by gender, 39% of men didn’t know how their retirement funds were divvied up, compared with 59% for women. And while 35% of men said they had done a “very good” amount of planning and preparation for retirement and were fully on track, just 17% of women said the same.
That could leave them open to an unpleasant surprise, if they find their retirement fund is more heavily weighted in stocks than they realize around when they decide to retire — and the market tanks. If a retiree or near-retiree has to pull a lot of money out of the market during a deep downdraft, that can be impossible to recover from, and mean a lower standard of living.
“Honestly, it’s a little frightening,” said Joel Schiffman, who oversees defined contribution products in North America for Schroders.
To Schiffman, that suggests that many people don’t have a financial plan. Without a goal and a plan, he said, every time the market takes a big downward move, savers are going to get scared and hunker down in cash, which earns very little.
Many workplace retirement savings plans like 401(k)s offer target-date funds, which adjust the mix of stocks and bonds to become more conservative as one approaches a target retirement date. Savers may view these funds as “set it and forget it” options, and so may not be very keyed in to how assets are divvied up at any one point.
Along with knowing what’s the right mix of stocks, bonds and cash to have, it’s hard to know how much to save for retirement. Just 26% of people surveyed who were near or at retirement thought they had saved enough. Only 4% said they were “living the dream.”
The fear of health-care expenses turning retirement dreams into a nightmare plays a part in that. Of the people who weren’t retired yet, 81% said healthcare needs draining retirement savings was a top worry, as well as a major market downturn.
When people were asked what they were more focused on during the Covid-19 crisis, however, working on their retirement plans wasn’t high on the agenda. Figuring out what to watch on Netflix and other streaming services (38% of those surveyed) perhaps unsurprisingly trumped the far more stressful tasks of coming up with a financial plan or strategy (29%) or focusing on an investment portfolio (26%).
The survey of 1,000 workers and retirees between the ages of 45 and 75 was done in late January.
