How well prepared are American workers for retirement?
Not very, according to the vast majority of studies, which have found that not only do many people have nothing saved for retirement, but those who've managed to put money away are way short of the mark.
According to a Financial Finesse study, as people are increasingly made responsible for funding their own retirement, just 19 percent are confident that they're on track to retire with enough money to do so.
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However, said the study, there are 10 financial behaviors that can boost people's chances of saving and investing enough, early enough, to see them through retirement.
Despite the fact that certain demographics—such as women, African-Americans, and Latinos—are behind in preparing financially to leave the workplace, folks who exhibit these 10 traits are better prepared than those who do not.
Here's a look at the 10 questions to ask—and the resulting 10 behaviors associated with a "yes" answer–that can have such a beneficial effect on people's retirement saving behavior.
1. Do I feel confident that my investments are allocated properly based on my risk tolerance and time horizon?
Seventy-four percent of the people who gave this response in the Financial Finesse study also said they were on track to meet their retirement goals, compared with just 36 percent of those who said they weren't moving in the right direction to line up retirement funds.
Paying attention to such things as asset allocation, risk tolerance, and time horizon implies that people have a better understanding of their own beliefs and behaviors about money, as well as the need to grow—or preserve—assets, depending on how close they are to retirement.
2. Do I have an emergency fund to cover unexpected expenses or to pay bills for a few months if I lose my job?
Having an emergency fund can make the difference between having to rely on credit cards with high interest rates or even resorting to less friendly sources of funds to tide one over in a financial emergency.
But while 78 percent of those who say they're on track for retirement have such a fund, only 40 percent of those who aren't have one.
3. Do I rebalance my investment accounts to keep my asset allocation plans on track?
All too many people "set it and forget it," despite the fact that their asset allocations change along with age and personal circumstances.
Understanding that it's important to keep on top of where money is invested played a role for 63 percent of "on track" respondents, while only 32 percent of those who weren't on track paid attention to such things.
4. Have I taken a risk tolerance assessment?
Lots of folks think they can tolerate considerably more risk than they actually can—until there's a hiccup in the market.
Then they find themselves pulling their money out at the bottom and then buying again at the top, usually at the worst possible time for potential retirement.
Understanding how they react to risk by taking an assessment, and allocating accordingly, was important for 77 percent of people on track, while just 31 percent of off-track savers did so.
5. Do I regularly pay off my credit card balances in full?
Not paying high finance charges on a running credit card balance is an important step in making sure there's enough money for retirement.
The folks who said they do this made up 74 percent of the on-track group, while only 30 percent of those not on track were able to say so.
6. Am I comfortable with the amount of nonmortgage debt I have?
A mortgage alone can constitute a pretty hefty obligation.
Piling other debt on top of it can be a real handicap, and while sometimes it's unavoidable, the 78 percent of those who said they were on track and also said they were comfortable with their debt levels managed it.
Among those not on track, only 29 percent were okay with the amounts they owed.
7. Do I know how much I need to save for college?
This one's a little harder.
Just 46 percent of on-track respondents said they knew what that amount was.
Among the not-on-track crowd, only 29 percent could say that.
8. Do I look at all my combined assets to develop a master asset allocation strategy?
Even the people on track for retirement don't necessarily have a handle on everything they own or are invested in, but more than half—51 percent—take into account what and where their assets are when they work on their financial strategy.
Just 28 percent of the people who aren't so well prepared for retirement are that well acquainted with how it all fits together.
9. Do I understand the tax implications of each of my investment and retirement accounts?
This can be a big one, since there are so many advantages and disadvantages to a range of actions.
Seventy-one percent of the on-track group have made themselves aware of tax strategies that can either pay off or handicap them on the way to retirement, while only 27 percent of the other folks have done so.
10. Do I contribute to a traditional or Roth IRA?
Half of respondents who say they're on track to retire have an IRA of some sort, while just 26 percent of the others do.
IRAs can provide additional retirement preparedness even if someone has a 401(k) at work, but not all that many people manage to do both.
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