Americans in the Dark About the Real Cost of Retirement

Edward Jones survey reveals more than one-third of Americans don't know how much they will need to withdraw from savings during retirement

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Edward Jones

Oct 11, 2011, 08:30 ET

ST. LOUIS, Oct. 11, 2011 /PRNewswire/ -- Americans are torn on how much savings they will need to withdraw from their investment portfolios each year during retirement. According to a new survey released today by financial services firm Edward Jones, 34 percent of Americans said they don’t even know what percentage of their savings they will need to take out annually in retirement. More women than men were uncertain about their retirement spending, as 38 percent said they didn’t know how much they would need compared with 30 percent of men who felt the same level of uncertainty.

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Conducted by Opinion Research Corporation, the survey of 1,011 respondents showed that 22 percent of Americans think that they will need to use more than 10 percent of their retirement savings each year. Age influenced this expectation as 33 percent of those between the ages of 35 to 44 expect to spend the same percentage on a yearly basis once they stop working. A smaller number of retired Americans (15 percent) believe they will need to withdraw more than 10 percent of their savings compared with 25 percent of those who are currently not retired.

In contrast to the older generations, younger Americans (18-34-years-old) say they do not believe their retirement will come at a high cost, as 19 percent said they plan to withdraw one to two percent annually from their retirement savings.

"While it is difficult to estimate exactly how much Americans will spend during their retirement years, there are a number of factors to consider when building a retirement plan, such a health care risks, changes in Social Security and the type of lifestyle they want to lead," said Scott Thoma, Investment Policy Committee member at Edward Jones. "It is important they work with their financial advisor to make sure their investment and savings strategies are in line with their retirement goals, as well as incorporating reasonable expectations for acceptable withdrawal rates, which we believe should start in the neighborhood of 4 percent. Ultimately, how much income they desire in retirement will determine how much they need to have to retire, so a well thought-out retirement strategy is essential."

Other key findings from the survey included:

Forty-four percent of Americans expect to spend less than 10 percent of their retirement savings each year. This decision was influenced by gender as 50 percent of men polled indicated the same compared with 37 percent of women.
Regionally, respondents differed on their retirement spending outlook. Twelve percent and 11 percent of Americans in the Northeast and West respectively expect to spend more than 20 percent of their retirement savings on a yearly basis. In contrast, a higher percentage of respondents in the South (49 percent) and Midwest (46 percent) expect to withdraw less than 10 percent of their retirement savings each year.
Household income significantly influenced retirement spending expectations as 50 percent of Americans with a household income of more than $100,000 plan to spend less than 10 percent of their retirement savings each year. Comparatively one-third (33 percent) of those with a household income of $35,000 to $50,000 expect to spend more than 10 percent annually.

About Edward Jones

Edward Jones provides financial services for individual investors in the United States and, through its affiliate, in Canada. Every aspect of the firm's business, from the types of investment options offered to the location of branch offices, is designed to cater to individual investors in the communities in which they live and work. The firm's 12,000-plus financial advisors work directly with nearly 7 million clients to understand their personal goals -- from college savings to retirement -- and create long-term investment solutions that emphasize a well-balanced portfolio and a buy-and-hold strategy. Edward Jones embraces the importance of building long-term, face-to-face relationships with clients, helping them to understand and make sense of the investment options available today.

Edward Jones, which ranked No. 11 on FORTUNE magazine's "100 Best Companies to Work For 2011," is headquartered in St. Louis. The Edward Jones Web site is located at www.edwardjones.com, and its recruiting Web site is www.careers.edwardjones.com. Member SIPC.

* Survey was based on 1,011 telephone interviews of U.S. adults conducted between the dates of September 23-26. The margin of error was +/-3%.

SOURCE Edward Jones