Given a half-decade of economic uncertainty, fear may still be the biggest motivator for retirement saving. The financial crisis inspired people everywhere to save more and hold off on short-term spending. "It shook people out of their complacency and got them thinking, 'I should save more,'" says Ken Hevert, Fidelity's vice president of retirement products. "All age groups—young people, too, are showing a tendency to be more conservative."
New surveys by two leading financial-services companies show how attitudes toward saving have evolved, and highlight a couple of easy steps that can have a big impact on savings. Fidelity, the largest provider of workplace savings plans and 401(k)s, and HSBC, one of the most global wealth managers, have identified two positive actions investors can take to get far more out of their retirement plans. HSBC says in a new study that people who have clear financial plans save significantly more for retirement, and Fidelity has found that people who open individual plans to supplement their workplace savings end up with much higher overall savings.
People still need to come up with proper asset allocations that are based on individual life stages and requirements, but the two steps suggested by HSBC and Fidelity appear to be things nearly everyone should consider:
Tip 1: Planning for retirement boosts savings dramatically, survey participants say.
Most people start saving for retirement without doing any financial planning, according to HSBC. On average, people have been putting away money for four years before they give it a thought.
It's a lost opportunity because financial planning clearly boosts returns, according to people interviewed for the survey. The "ready, shoot, aim" style of investing in those early years can lead to a costly mistake such as inappropriate investments for a person's life stage. In the United States, people said they saved 49 percent more as a result of planning. In all 25 countries where HSBC conducted its survey, the total was 44 percent.
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Apart from helping people make better investing decisions, the planning process gives them positive goals for retirement. HSBC says there is "a cause and effect relationship" between planning and saving more money, and it's not merely a result of people with more money having more resources to create plans.
"There are very clear themes for what participants worry about locally and globally," says Andy Ireland, HSBC Bank USA executive vice president of retail banking and wealth management. "People everywhere have a level of anxiety about not having enough savings to last through their life. Planning helps overcome that." Americans scored above average in one measure. Only 38 percent said they would choose to go on vacation over making retirement contributions, versus 43 percent for the 25-country average.
Either way, the survey found, too many people "would just rather go on vacation and forget about it."
Tip 2: Putting eggs in more than one basket produces far higher returns.
Some might say this is another case of what comes first, the chicken or the nest egg. But a new report from Fidelity shows that people who set up more than one retirement basket tend to end up with a lot more money for retirement. An analysis of almost one million accounts found that people who had more than one account end up with three times the overall savings.
Those with both a Fidelity 401(k) and an Individual Retirement Account (IRA) have combined average balances of $225,600, which is three times higher than the average Fidelity 401(k) balance of $77,300.
[Read: What's Better Than Rebalancing for Your Retirement?]
Fidelity's Hevert says opening more channels for collecting funds has a positive effect on the amount people save. Each collection point is a way to make savings easier. Even credit cards that contribute a percentage of purchases to your retirement account can be a way to save without having to make the difficult choice of sending a check to a savings account, he says.
"Positive reinforcement works a lot better than fear when it comes to savings," says Hevert, noting that one of the biggest factors in getting people to save is matching funds from employers.
The bottom line: U.S. savers rank high in saving for retirement, but still need more.
But there were more similarities than differences in the savings patterns and motivations among respondents in the 25 countries in HSBC's annual Future of Retirement survey, which was mostly made up of leading Western economies but also included developing ones like China, India, Mexico, Singapore, Egypt, and Taiwan. An emerging global middle class has more access to medical care. But that means that as in the United States, people in those countries are living longer and cannot fund every year of retirement. Americans expect to live 21 years post-retirement but figure they only have savings for 14. Similar shortfalls were reported for all of the countries.
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Fidelity gave some reasons for optimism, though, saying it found people were hitting their New Year's saving and spending goals 62 percent of the time, the highest level ever. And it's not just talk. Fidelity reported the highest-ever amounts in its retirement plans at the end of last year, at $77,500, an increase of 12 percent in 2012. Much of that came from investment gains. But it also came from people putting away more, and marked the 15th straight quarter of increased savings in the plans.
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