Retirement planning means a lot of different things to different people. For many, it means simply making estimations of how much you will need to live comfortably in retirement and putting money into savings to help achieve your monetary goal.

Details of Retirement Planning

Too often, though, the good intentions aligned with these practices are overshadowed by the lack of firm details, which is one reason many people don’t end up saving enough for retirement. Because of this, more and more Americans are working years longer than they initially expected. That type of situation can be avoided by careful retirement planning, according to a new Stanford study.

The importance of having a written plan for retirement has been illustrated in other studies, and this Stanford study repeats those findings with university employees. The more detailed the retirement income projections and information, the more individuals save, according to the study. Gopi Shah Goda, an economics senior research scholar at the Stanford Institute for Economic Policy Research, led the research to determine the importance of concrete retirement projections in regards to savings.

Projections Affect Savings

University employees were randomly placed into two groups. One group received customized information about retirement planning, defined contribution plans, and how those contributions translate into retirement income. The control group didn’t receive any such detailed information. Those who were given the personalized financial information were more likely to change their contribution rates to save more, compared to those in the control group who did not.

"The findings suggest that people are not perfectly informed about the link between saving today and income in retirement," said Goda. Also, many overestimate the level of retirement income that current saving generates.

Another issue is that many people are not well versed in financial concepts and have a hard time understanding the complicated charts and information that are typically presented to them.

"Many studies have shown that financial literacy is low and that many people struggle with basic financial concepts. Projecting retirement income requires complex calculations and several assumptions that can be challenging for even the financially sophisticated," she said.

Waiting Too Long to Plan

Procrastination is another problem, as is often the case with financial tasks. People prefer to kick the can down the road rather than address the issue at the current time. This often leads to seriously decreased savings and a lack of preparedness for retirement, something many Americans are currently facing. Retirement planning is something that should begin very early on, preferably in your 20s or 30s, to allow for the greatest amount of time to save. With increasing cost of living, starting early becomes all the more important.

Health care is a major cost that many people forget to factor into their retirement plans. A recent study found that a majority of Boomers believe costs incurred from long term health care is covered by the Affordable Care Act, although it is not. Long term care is one aspect of retirement healthcare that needs to be addressed far in advance in order to protect your assets from the high cost that can potentially devastate your portfolio.

Read more about planning for long term care or find out more about saving for retirement. If you are interested in learning more about the cost of long term care, fill out this form and we will provide you with a personalized quote comparison of the top policies.