Retirement Plans: Planners and Nonplanners

With the aging of millions of baby boomers, retirement planning is rapidly increasing in importance. This study explores differences in characteristics of individuals who have well-articulated retirement plans and those who do not. Women and those with low financial net wealth are less heavily represented among planners. More heavily represented among the planners are the self-employed, those with high financial net wealth, and those who have spoken to a professional financial planner. The expected primary source of retirement income is also associated with planning status. Those expecting to rely primarily on Social Security for their retirement income are less heavily represented among planners, while those expecting to rely mostly on defined-contribution plans or on savings or income from personal investments are more heavily represented. Since procrastination, inertia, and low expectations of success often impede retirement planning, three recommendations are provided: (a) develop user-friendly software to entice individuals to explore retirement planning in a fun way; (b) improve financial literacy education to develop understanding and motivation; and (c) institute programs that use inertia to encourage greater saving.