Voya Retire Ready Index™ study profiles the attributes of those who score as “role models” for financial preparedness
Voya Financial, Inc. (NYSE: VOYA), released findings today from a new study — the Voya Retire Ready Index™ — which measures the retirement readiness levels of Americans who are either working or recently retired. The study shows how each group of individuals score on an average basis, while also examining the attributes of those who score at the highest levels in order to learn more about what they do to prepare.
The Voya Retire Ready Index™ was designed on the premise that successful retirement preparation involves three important components – 1) sufficient knowledge and awareness of how to prepare (“knowing”); 2) accurate and comprehensive planning activity (“planning”); and 3) adequate savings to generate sufficient income replacement (“having”). The study incorporated two surveys that were conducted with Greenwald & Associates, Inc. The surveys asked current workers (the “Workers”) and recent retirees (the “Retirees”) a series of questions related to these three retirement readiness components. Using the survey results, scores were calculated on a scale from zero to ten in each category, and then again on an overall basis to come up with a combined score.1
The findings show how Americans are generally behind in their readiness, and that planning represents their most significant hurdle as well as the area with the most opportunity for improvement. Workers who were surveyed for the Voya Retire Ready Index™ averaged an overall score of 4.1 out of ten, while Retirees averaged a 5.5.
“As the retirement landscape evolves, individuals have taken on greater responsibility to plan and save so they can reach their future retirement readiness goals,” said James Nichols, head of Retirement Income and Advice Strategy for Voya Financial. “In order to better understand the dynamics that drive greater retirement readiness, Voya developed an approach that measures how Americans are preparing for and experiencing this important financial milestone. While it’s clear that individuals can improve upon all aspects of their retirement readiness, our study suggests that planning is an important lever — and an area where even more support is needed.”
Knowledge is Power…But Requires Action
Voya’s study found that out of the three categories, both Workers and Retirees score highest on knowledge, but lowest in planning. Workers average a 3.0 in the planning category, while Retirees score slightly better at 4.2. The findings show that fewer than one-in-five Workers (17%) and only about one-quarter of Retirees (26%) had a written financial plan, while roughly one-third of Workers (31%) and Retirees (35%) had a comprehensive budget. The study also reveals gaps in retirement income planning, as more than six-in-ten Workers (63%) had never attempted to calculate what their savings would be if converted into future monthly income.
“While knowledge of retirement-related concepts is an important foundation which should always be improved, the findings reinforce what we know is required to help advance retirement readiness —more individuals need to put their knowledge to action,” noted Nichols. “That’s why resources such as Voya’s myOrangeMoney™ and online budget tools are critical to helping Americans take the necessary steps toward developing a true long-term retirement plan.”
Despite their low planning scores, a significant majority of those surveyed for the Voya Retire Ready Index™ agreed that certain planning-related activities would boost their sense of confidence and control. More than eight-in-ten Workers (83%) and three-quarters of Retirees (76%) confirmed that calculating the amount of future monthly income their savings produced would provide at least a moderate boost in confidence. Two-thirds of Workers (66%) said using self-directed financial planning and budgeting tools would provide this same benefit.
“We know this disconnect between what people say could help improve their financial security and what they actually do is caused by a number of factors, including inertia, anxiety, competing financial priorities and the fact that many view retirement as a distant concern,” said Nichols. “Still, our findings demonstrate that some are successful in breaking through these barriers.”
“Role Models” on the Voya Retire Ready Index™
Voya’s study found that a sub-set of Workers and Retirees did report to be more proactive and well-prepared, and they averaged the highest scores on the Voya Retire Ready Index™. These individuals engaged in behaviors which put them into Voya’s “role model” category for readiness. Some of the key findings related to these two highest-scoring groups include the following:
- Nearly two-thirds of the Workers (65%) had a written budget, and almost half (45%) had a formal written financial plan.
- More than two-thirds of the Retirees (68%) had a financial plan and approximately eight-in-ten (81%) had a relationship with a financial professional.
- A significant majority of Workers (85%) and just over half of Retirees (51%) reported owning more than $100,000 in life insurance coverage.
- More than eight-in-ten Workers (82%) and nearly the same number of Retirees (78%) had a specific strategy for investing their assets.
- Nearly all of the Retirees in this group (97%) were happy with their financial security, and more than eight-in-ten (81%) retired because they wanted to.
- Nearly all Workers in this group (96%) reported to be somewhat or very confident in how well they were prepared for retirement.
“Perhaps the most surprising insight is that today, through innovations in financial technologies and increased access to professional advisors, Americans have more ways to take action, build confidence and improve their chances for achieving a secure retirement,” added Nichols. “Our challenge is to ensure that more people know where to find these resources and that they take the necessary steps.”
Voya offers retirement customers a suite of accessible, compelling and easy-to-use retirement readiness planning resources — from field- and phone-based financial professionals, to a number of innovative digital planning and budgeting capabilities. These resources are available to help individuals with a broad range of activities, such as understanding their retirement income needs to budgeting and protecting their financial security.
For more information and additional findings from the Voya Retire Ready Index™ study, please visit http://go.voya.com/IndexReport.
As an industry leader and advocate for greater retirement readiness, Voya is committed to delivering on its vision to be America’s Retirement Company™ and its mission to make a secure financial future possible — one person, one family, one institution at a time.
1. The Voya Retire Ready Index™ results are based on findings from two online consumer surveys completed between July 14 and July 25, 2014 with Greenwald & Associates, Inc., a full-service market research firm with expertise in financial services. One survey involved 1,008 workers over the age of 21 who were employed full time and managed or shared in the financial decisions of the household (the “Workers). A second survey involved 1,002 adults below the age of 85 who had retired within the last five years, managed or shared in the financial decisions of the household and, if married, had a spouse who was not working full time (the “Retirees”). Both surveys asked a parallel set of questions to assess the retirement preparedness of each group. Data on the Workers was weighted according to data from the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. The following demographic variables were weighted: household income, gender, and education. Each category was constructed to have a maximum possible score of 10 (where responses were weighted based on factors selected by Voya, and where weighting responses using alternative factors would yield different results). The scores were then averaged together to determine a cumulative score for Workers and Retirees. The Voya Retire Ready Index™ scores are based on survey findings that were averaged together and do not reflect any single respondent’s experience.
About Voya Financial
Voya Financial, Inc. (NYSE: VOYA), is composed of premier retirement, investment and insurance businesses serving the financial needs of approximately 13 million individual and institutional customers in the United States. The company’s vision is to be America’s Retirement Company™ and its guiding principle is centered on solving the most daunting financial challenge facing Americans today — retirement readiness. Working directly with clients and through a broad group of financial intermediaries, independent producers, affiliated advisors and dedicated sales specialists, Voya provides a comprehensive portfolio of asset accumulation, asset protection and asset distribution products and services. With a dedicated workforce of approximately 6,500 employees, Voya is grounded in a clear mission to make a secure financial future possible — one person, one family, one institution at a time. For more information, visit http://voya.com or view our Voya Financial Interactive Company Profile. Follow Voya Financial on Facebook and Twitter @Voya.