A new study focuses on the savings rate that people in a workplace retirement savings plan need in order to achieve a more secure retirement.
WINDSOR, Conn., March 3, 2014 – A new consumer survey finds that 44 percent of Americans expecting a tax refund this year plan to use it to pay down credit card or other debt — only 9 percent say they will save it in a retirement account, according to LIMRA Secure Retirement Institute (LIMRA SRI).
“It is good to see so many Americans are considering the impact holding debt has on their overall financial security and are taking steps to diminish the debt they are carrying,” said Cecilia Shiner, assistant research director, LIMRA SRI research. “But more than one and half times as many Americans said they would use their tax refunds for vacations and three times as many said they would use it for everyday expenses, rather than increasing their retirement savings.”
The survey asked consumers whether they were confident that they would be able to live the lifestyle they want in retirement. Those consumers who are confident in achieving their desired lifestyle are three times as likely as those who are not confident about their retirement prospects to place their tax refund into a retirement savings account (12 percent vs. 4 percent). In addition, 29 percent who are confident in their ability to achieve their retirement lifestyle said they were already saving enough for retirement, while only 4 percent of those who are confident said they were saving enough for retirement.
To get a sense of consumers’ mindset, LIMRA SRI asked them whether they preferred to “live for today” or “plan for tomorrow.” It was clear those who believed in the carpe diem mentality were more likely to use their refund to pay off credit card debt, spend it on everyday living expenses or vacation than those who had a “plan for tomorrow” approach to life.
“Perhaps those who ascribe to the “live for today” lifestyle have incurred more credit card debt and need to use their tax refund to make ends meet,” noted Shiner. “We hope that people are carefully considering their choices and their long-term implications. For most people, retirement may last 25-30 years and every dollar you save now can significantly improve your chances for living comfortably later in life.”
The findings are based on a nationally-representative survey of 2,010 Americans. The survey was fielded in January 2014.