As older Americans move into retirement, they face many decisions. Retirement income planning — making a plan to coordinate these decisions to ensure enough income to pay the bills and prepare for uncertainty — is critically important. But Americans may not be as knowledgeable as they should be to face these decisions. Only 20% passed The American College’s recent Retirement Income Literacy Quiz.
Many of the members of the Boomer generation believe that they have failed to save enough for retirement, and there is good evidence that this is true. Declines in defined benefit plans and the impact of the Great Recession are significant trends affecting retirement savings for this generation.
Let’s say you get a call from your financial planner, who, concerned that markets are significantly overvalued, has decided to park 20 percent of your portfolio in cash. Your first reaction might be, “Sure, that sounds prudent.” But, in fact, it might not be. Your planner may be giving the same blanket advice to all his clients—the ones preparing for retirement now as well as those who are already retired and tapping their savings.