Retirement Preparedness Varies Across Major Metro Areas

Readiness to retire may depend on where you live.

An Ameriprise Financial survey titled “Retirement Mindscape 2010 City Pulse” examined the 30 largest metro areas in the U.S., asking those who live in those areas about retirement preparedness and confidence. It found those in Minneapolis-St. Paul were most ready and those in Los Angeles were least prepared. Other high-ranking areas were Raleigh-Durham (#2) and Nashville (#3); low ranking areas include Indianapolis (#29) and Orlando (#28).

Specifically, areas were ranked according to how likely their residents were to have determined the amount of money needed for retirement, as well as their saving habits. The confidence of respondents and their retirement activity plans were also taken into consideration.

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“Our latest research allows us to take the pulse of each major metropolitan area to see where there is alignment–or significant discrepancies–in how people have planned for and feel about retirement,” said Craig Brimhall, vice president of retirement wealth strategies at Ameriprise Financial. “In some cases, local economic conditions have had such a substantial impact on people that their levels of preparation and confidence appear a bit out of sync.”

Those economic conditions appear to have taken a large toll for Los Angeles residents, for example, where more than a third of those surveyed said they had experienced a recent career setback or layoff. In Indianapolis, 30 percent of those interviewed report that the economy has impacted retirement plans, compared with a national average of 25 percent. In well-prepared areas like Nashville and Raleigh-Durham, respondents said they had given a lot of thought to retirement activities. Key findings by Ameriprise suggest that the sunny weather in San Diego (ranked #6) could have an effect on the general feelings associated with retirement, where 74 percent reported their view was positive.

See the full report and key findings.

Written by Elizabeth Ecker

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  • Californians in the last six decades have been blessed with inordinately high home values. Many individuals who lived here during their most productive working years by the skin of their teeth were able to sell their homes and move to less costly areas transferring much of their California home equity into retirement savings. This is one reason why our senior population is proportionately low, i.e., more retirees moving out of California than moving in.

    Many Baby Boomers counted on that economic condition as their retirement nest egg but it has failed them. The situation most likely will not recover and move forward for at least another year, delaying many retirements and also causing many to reconsider where they will relocate in retirement years and how they will provide for retirement.

    Retirement income is also lower than that of predecessors because of the conversion by employers to defined contribution retirement plans from defined benefit pension plans in the 90s. (When the value of the assets in a 401(k) plan drop no employer contributions make up for that loss; however, the opposite is true for a defined benefit plan. Defined contribution plans capture retirement gains for employees but the opposite is true for defined benefit plans.) So now Californian Baby Boomers are hit with a double whammy, lower home equity and lower retirement income base.

    In the early nineties as the value of defined benefit pension assets exploded from the dot com balloon, many employees believed it was in their best interests to capture that growth into defined contribution plans (“DCP”) rather than the traditional defined benefit plans (“DBP”) of their employers. An overfunded DBP at “Bluestar Airlines” was at the heart of the 1987 movie, “Wall Street.” What employees did not fully understand was the liability for their retirement income transferred from the employer to the employee when retirement plans went from a traditional DBP to a DCP. They did not fully understand that 401(k) plans are not generally employer contribution based plans; all they provide is temporary tax shelter through deferral and the ability to retain pension gains and to their detriment pension losses.

    Although retirement planning was frequently discussed among Baby Boomers, most in California have ignored traditional retirement planning to rely on “California retirement” planning. For almost half a century, California home appreciation provided adequate wealth for retirement. Californians are now adjusting to the second disillusioning downturn in home values. It will take time to adjust fully.

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