Top 10 cities for retirement readiness
- The New Retirement Mindscape® 2013 City Pulse survey declares San Francisco as the leading city in retirement readiness.
- The most confident citizens contribute plenty to retirement accounts, work with financial advisors and feel empowered by the idea of retirement.
- Surprisingly, the Detroit metro area ranked second in retirement readiness despite the fact that the city recently declared bankruptcy.
Citizens in the San Francisco, Detroit and Hartford metro areas feel good about retirement. So good, in fact, these cities topped the list in the Ameriprise Financial fourth annual New Retirement Mindscape® 2013 City Pulse index.
Detroit? That was the big surprise for us, too. With the metro area coming in a strong second, we found out that the Motor City isn't all doom and gloom. Fifty-eight percent of Detroit area residents have contributed to a 401(k), and 56 percent have contributed to other retirement accounts. That's higher than the national average of 51 percent who have contributed to a 401(k). Almost half of the residents surveyed feel on track for retirement (49%), and over seven in ten (71%) report positive feelings about retirement.
Where is retirement readiness most lacking? At the bottom of the rankings this year are Orlando, Los Angeles and Nashville. In general, residents of these three cities are on par with their peers when it comes to preparing for retirement, but they are less likely to say they think they will reach their retirement savings goals.
Retirement readiness lessons we all can learn
There are some similarities in the top three cities that are worth noting. Residents in all three areas had a higher rate of contributing to IRAs and other non-employer sponsored retirement savings accounts than other city dwellers. What's more, people in two of the top three cities, Detroit and Hartford, were significantly more likely to work with a financial advisor than the average American.
Finally, a positive attitude goes a long way toward retirement readiness. Residents in two of the three top ranked cities, San Francisco and Hartford, are much more likely to say they feel empowered by the idea of retirement than Americans nationwide.
The flip side of confidence
Feeling good about retirement can also be a bit of a challenge. Feeling too optimistic may mean we don't feel that urgency to prepare for retirement. Sixty-seven percent of Americans said they felt positively about retirement, the highest percent in four years. But, we also found that Americans aren't necessarily taking the steps they need to take to prepare for this milestone. "The economy is recovering and people are feeling really good about their new lives in retirement, which is great. But, that new optimism may translate into a lack of urgency to prepare," says Suzanna de Baca, Vice President of Wealth Strategies at Ameriprise Financial.
Also, Americans may be largely underestimating how much savings they need to fund their retirement. Consider this: The median amount respondents say they'll need to retire with confidence is $500,000. Yet the median amount they have saved is only $63,000. What's more, only about a quarter of Americans (23%) said they have calculated how much they'll need to save to fund their retirement.
The biggest retirement challenge: Health care costs
Nearly half of Americans (45%) think that paying for health care will be the most challenging financial issue in retirement. Of those who have tried to estimate what they'll need, 50 percent of adults are counting on a nest egg of $100,000 or less for health care costs.
However, that may not be enough to cover the average cost of $283,000 for a couple that retired in 2012, according to the Employee Benefit Research Institute. And with health care costs escalating, it would fall far short of the health care cost estimate of $454,000 that a couple retiring in 2020 with median drug expenses would need to have a 90 percent chance of having enough money for health care in retirement. In addition, only 13 percent of Americans said they have purchased long-term care insurance.
On the bright side, health is top of mind, with Americans planning to spend an average of 14 hours per week in retirement to maintain their health.
The results of this study tell us that the more you make retirement part of your overall financial planning, the more confident you'll feel about the future. With your advisor's help, you can put the plans in place now to help make sure you feel ready for retirement.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.About the survey
The New Retirement Mindscape 2013 City Pulse index was created by Ameriprise Financial utilizing survey responses from 10,045 U.S. adults ages 40-75. The survey was commissioned by Ameriprise Financial, Inc. and conducted online by Harris Interactive from June 6 - June 26, 2013. The national average sample and the 30 U.S. metropolitan areas were each weighted independently to best represent each area. Propensity score weighting was also used to adjust for respondents' likelihood to be online.