Financial Disruptions Cost Americans $2.5 Trillion in Lost Retirement Savings
February 17 2015 - 8:30AM
Business Wire
TD Ameritrade’s annual survey reveals
developing good savings habits and financial literacy are key to
recovery
Major health issues. Unemployment. Divorce. Even buying a house.
These are all major life events that can disrupt long-term savings
and investing strategies and negatively impact retirement plans.
When Americans experience a disruption to their financial plan, it
can have a significant impact on the amount they can put away each
month for retirement or even to prepare for the next disruption. TD
Ameritrade’s 2015 Financial Disruptions Survey explores the impact
these life events can have on the average American’s long-term
savings habits, reveals a frightening economic hit and uncovers
lessons learned.
The Economic Impact
- Two-thirds (66 percent) of Americans
surveyed have seen their long-term and retirement plans disrupted
(“Disrupted Americans”)
- There is an opportunity cost to
disruptions. Financial disruptions cost Americans $2.5 trillion in
lost long-term and retirement savings1
- A loss of employment or having to take
a lower-paying job is the most common disruption
Life Before the Disruption
- 84 percent of “Disrupted Americans”
were saving for retirement prior to the disruption; the average
“Disrupted American” was saving over $500/month
- 40 percent of “Disrupted Americans”
felt that having a steady income meant that they were prepared for
a disruptive event
- Prior to the disruption, “Disrupted
Americans” were most likely to discuss their financial plans with a
spouse or partner
Life During the Disruption
- 79 percent of “Disrupted Americans” had
to reduce their savings and/or expenditures during the disruption,
and, on average, reduced their retirement savings by almost
$300/month
- 50 percent of “Disrupted Americans”
needed to withdraw money from savings or borrow funds
- Decreasing expenditures, using less
credit and repaying debt are the most likely changes made by
“Disrupted Americans” in order to recover financially
Tips on Staying Retirement-Ready
“Every human being faces the threat of a financial disruption
because there will always be external factors that can upset the
course of a person’s life. The key is to have a financial plan that
incorporates risk management because no one knows when these
disruptions can occur,” said Lule Demmissie, Managing Director of
Retirement at TD Ameritrade. “Saving and planning for our
retirement does not guarantee we will be 100 percent protected from
disruptions, but what it can do is help shelter us from the
unexpected and give us a stronger footing in adjusting after a
disruption. In retirement planning time can be an asset or a
liability. The earlier we start the better- the key is to
start.”
On average, “Disrupted Americans” who are back on track with
their long-term retirement goals took almost five years to get
there (four years, eight months). Yet, half of those disrupted (49
percent) will need to delay retirement, or forego it completely.
With the benefit of hindsight, “Disrupted Americans” said they
would have saved a greater proportion of their income (44 percent),
started saving or investing earlier for retirement (36 percent) and
26 percent said they wished they had been more educated about
long-term savings and investing. According to a recent TD
Ameritrade survey of retired baby boomers, those who successfully
prepared for retirement said the top five things that contributed
to their success were:
1. Limiting use of credit (67%)
2. Saving early and consistently (58%)
3. Spending less on luxuries/discretionary
items (58%)
4. Having employment with an excellent salary
(56%)
5. Investing in/maintaining a well-balanced
portfolio (51%)
“A retirement plan is adjustable and should evolve over time, so
self-directed investors are in a better position to more easily
take a hands-on approach to their retirement and investing
strategies,” said Demmissie. “While no one can predict when, or if,
a financial disruption will occur, the key is to focus on what can
be controlled. Understanding ones retirement goals, regularly
evaluating your portfolio and being prepared to make adjustments to
your long-term strategy along the way can help you pursue your
retirement plan.”
“Disrupted Americans” interested in getting back on track for
retirement are encouraged to visit TD Ameritrade’s Retirement
Planning Page, which offers a number of retirement planning
resources that can help investors pursue their goals.
The survey findings can also be seen in an infographic by
visiting www.AMTD.com.
For the latest news and information about TD Ameritrade, follow
the Company on Twitter, @TDAmeritradePR.
1: $2.5 trillion loss estimated as follows: On average, a survey
respondent experiencing a disruptive event will save almost $300
less per month for a period of almost five years, meaning their
savings pot will be $16,000 less than it otherwise would have been.
Two-thirds (66%) of survey respondents (or 158 million Disrupted
Americans out of a possible 240 million U.S. adults2) experienced
these sorts of disruptions over the course of their lives,
translating to a National loss of $2.5 trillion.
2: US Census Bureau, US adult population of 240 million, 2013
estimate http://quickfacts.census.gov/qfd/states/00000.html
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Source: TD Ameritrade Holding Corporation
About Head ResearchHead Research is a division of Head
Solutions Group (U.S.) Inc., a leading market research partner for
Financial Services companies in North America. With offices in New
York, Toronto and Montreal, Head delivers the deep customer
insights that increase institutional knowledge and propel business
action. TD Ameritrade and Head Research are separate and
unaffiliated firms and are not responsible for each other’s
services or policies.
About the 2015 Retirement Survey MethodologyAn online
survey was conducted with 2,019 U.S.-based adults who had
experienced an event or situation that had an effect on their
financial plans for the long–term/retirement by Head Research, on
behalf of TD Ameritrade, Inc. Sample was drawn from major regions
in proportion to the U.S. Census. The statistical margin of error
for the total sample of N=2,019 adults within the target group is
+/- 2.2% (assuming that participants are the same as
non-participants). This means that, in 19 out of 20 cases, survey
results will differ by no more than 2.2 percentage points in either
direction from what would have been obtained from the opinions of
all target group members in the U.S.
TD Ameritrade Holding CorporationFor Media:Brendan
McManus, 201-369-8541Communications & Public
Affairsbrendan.mcmanus@tdameritrade.comOn Twitter
@TDAmeritradePRorFor Investors:Jeff Goeser, 402-597-8464Investor
Relations & Financejeffrey.goeser@tdameritrade.com
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