A retirement savings strategy should include a Plan B in case of inability to continue saving at a projected rate until a projected date, a study has said, but less than half of Americans have such a backup plan.
Even workers who have such a specific plan–and many don’t–“may still experience poor health or unforeseen events that can lay waste to the best retirement strategies. If workers are unable to work for long periods due to poor health or find themselves having to give up work altogether and retire early, they may have to draw on savings and investments which had been intended to fund retirement. The best retirement strategy is one that contains a backup plan,” said a study by the Aegon Center for Longevity and Retirement.
In a poll, of the 47 percent of Americans who said they have a backup plan–45 percent said they don’t and the rest said they don’t know–the number one strategy, cited by 54 percent, would be to rely on current savings. Respondents, who were allowed to select all that applied, also said they would turn to the work income of a spouse or partner, 32 percent; early withdrawals from retirement accounts, 22 percent; disability benefits, 20 percent; and downsizing/selling their home, 19 percent.
The study added that even those strategies may offer only limited protection. For example, savings could be depleted quickly, income from only one working spouse may be inadequate in a household that has had two earners, there are eligibility standards for disability benefits, and downsizing/selling a home can be a lengthy process that may not produce readily available cash quickly and that comes with costs.