Using Online Calculators, Advisors Raise Workers’ Retirement Confidence Levels
April 2, 2013 by Cyril Tuohy
Employees who use online calculators and retirement advisors are more likely to exhibit higher levels of retirement confidence, according to new research by the Employee Benefit Research Institute (EBRI).
The savings targets set by those in the lowest income quartile who had sought the input of a financial advisor reduced their risk of running short of money in retirement by anywhere from 9 to nearly 13 percentage points, depending on family status and gender, the research found.
Those in the lowest income quartile who used an online calculator decreased their probability of running short of money in retirement by anywhere from 14 to more than 18 percentage points, the research also found.
The findings are based on data published in EBRI’s 2013 Retirement Confidence Survey (RCS) released in March.
“As American workers bear a growing responsibility for accumulating retirement income and managing the drawdown of those savings during retirement, it is more important than ever that households be able to set adequate targets for their retirement savings,” Jack VanDerhei, EBRI research director and co-author of the report, said in a statement.
While just over a quarter (25.6 percent) of the RCS respondents used either an online calculator or a financial advisor, nearly half (44.6 percent) were more likely to simply guess at their savings needs, VanDerhei also said.
Those who “guessed” at retirement savings targets were less likely – across all four income quartiles – to choose an adequate goal for retirement, the survey found.
“Clearly, confidence alone is insufficient to assure the establishment of a savings target sufficient to provide adequate income throughout retirement,” VanDerhei said. “More importantly, it would appear that encouraging the broader use of tools, such as online calculators, or the services of trained professionals, such as licensed financial advisors, would be an important public-policy consideration.”
The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute that focuses on health, savings, retirement and economic security issues. It is based in Washington, D.C.