Retirement Readiness Lacking in Some of America’s 30 Largest Metros

More than half of Americans say candidates’ positions on Social Security and Medicare are very likely to impact their vote during the upcoming election – but debate over the future of these programs doesn’t appear to be prompting an increase in personal retirement savings. In fact, the number of U.S. consumers who report making financial preparations for retirement has fallen to 70%, the lowest level in three years, according to a retirement readiness index released today by Ameriprise Financial (NYSE: AMP). The New Retirement Mindscape® 2012 City Pulse index examines the 30 largest U.S. metropolitan areas to determine where consumers are the most prepared for and confident about retirement and also tracks national and local retirement trends over time.

Hartford-New Haven (#1), San Diego (#2) and Minneapolis-St. Paul (#3) claimed the top three spots on the third annual index while Washington D.C. (#30), Charlotte (#29) and Indianapolis (#28) ranked lowest. Metropolitan areas were scored based on responses to a national survey that measured consumers’ likelihood to have determined the amount of money they need to save for retirement and their actual saving habits. The index also takes into account if people report planning for a variety of activities during retirement and express confidence about achieving their retirement goals.

“While the majority of Americans we surveyed express positive feelings about retirement, we’re still seeing a significant lack of confidence – in fact, nearly half admit they’re concerned about outliving their savings,” says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. “The economic environment surely contributes to this uncertainty, but with proper planning, people can regain a sense of financial security and confidence in the future.”

Financial preparedness elevates top ranked metros

Several things set apart the top ranked metros. Residents of Hartford-New Haven, San Diego and Minneapolis-St. Paul are significantly more likely to say they are making financial preparations, including setting aside money for retirement, determining how much they need to save and consulting with a financial advisor. Perhaps as a result, they are also much more likely to feel on track and financially prepared for retirement.

In top-ranked Hartford-New Haven, three-quarters (75%) of residents say they’ve set aside money for retirement, compared to 63% of people nationwide. Nearly half (49%) report feeling on track for retirement – the most of any metro – and a sentiment expressed by significantly fewer consumers across the U.S. (37%).

However, despite the efforts they’ve made from a financial standpoint, residents of these areas are only on par with the rest of the nation with regard to planning for the activities they’d like to pursue during retirement – a fact which may leave them less prepared than they actually feel. In fact, in third-ranked Minneapolis-St. Paul, where residents report the highest levels of financial preparation, a mere 18% say they have given a lot of thought to where they might live in retirement and how they plan to rest and relax.

While the story isn’t as positive for the bottom ranked metros, it may not be as grim as it initially seems. Indianapolis and Washington D.C. are on par with the national average with regard to financial preparation, while Charlotte scores just slightly below. However, residents of these metros report a significant lack of confidence in their ability to reach their retirement goals.

Significant differences and regional trends noted in this year’s rankings

While some metros made significant climbs up this year’s index, others experienced dramatic declines. Nashville (#7), Atlanta (#10) and Minneapolis-St. Paul (#3) ranked at least 15 spots higher on the 2012 index than they did in 2011, while Sacramento-Stockton-Modesto (#18), Chicago (#27) and Portland (#19) each dropped at least 14 positions.

Nashville made the largest climb to seventh, after falling to 26th in 2011, down from third in 2010. Local residents are significantly more likely than consumers across the U.S. to have thought a lot about the activities they would like to pursue during retirement (82% vs. 75%) – a dramatic change since 2011 when 69% of locals said the same. They also demonstrate a slight increase in positive sentiment with one-third (32%) expressing that they’re very confident they’ll achieve their retirement goals, compared to 24% last year and one-quarter (25%) nationwide.

The Sacramento metro experienced the most significant decline, falling to 18th, down from second in 2011 and fourth in 2010. Locals are less likely to report making both financial and lifestyle preparations than they were in either of the previous two years. Sacramento residents (20%) are also significantly more likely than people in other metros (14%) to say student loan debt has taken a toll on their finances – and consequently on their ability to meet long-term goals. Of those affected, 38% admit to reducing the amount they’re saving for retirement while 15% say they’ve withdrawn money from a retirement account to cover loan payments.

The mood appears a bit dreary in the Sunshine State, with each of Florida’s three major metros ranking in the bottom 10 on the index. While Miami-Ft. Lauderdale (#20) moved up four spots since 2011, Orlando (#22) and Tampa (#23) both ranked considerably lower than they did last year. In Orlando, a popular destination for retirees, 37% of residents admit that they haven’t thought much about preparing for the retirement. And despite its positive move up the index, the local economy may be still be taking a toll on mindsets and pocketbooks of people in the Miami area. Compared to U.S. consumers in general, they are significantly more likely to cite job security and a drop in housing values as the issues most likely to jeopardize their retirement plans.

A more positive trend was noted in the Manufacturing Belt. Though only one metro broke into the top half of the index this year, Pittsburgh (#9), Detroit (#17) and Cleveland (#24) each climbed three spots, while Indianapolis (#28) rebounded slightly from last place in 2011. Whether it’s due to a renewed auto industry or other factors, residents of each of these metros were at least slightly more likely than people across the U.S. to say they had contributed to an employer-sponsored plan.

Study also reveals insights on the upcoming election

Issues that may impact the retirement plans of millions are expected to be debated heavily during the upcoming election. A majority of consumers say candidates’ positions on health care (60%), Social Security (55%), taxes (53%) and Medicare (52%) are very likely to influence their vote – while 41% note unemployment. Similarly, more than one-quarter cite changes to Social Security (29%) and healthcare costs (26%) as the issues most likely to jeopardize their retirement plans.

Retirement status appears to impact how strongly people feel about these issues. While candidates’ positions on health care are frequently cited as a deciding factor for both retired and non-retired Americans, significantly more retirees say this topic is very likely to influence their vote (71% vs. 55%).

Americans’ focus on health care may be for a very poignant reason as health concerns appear to force many people into an early retirement. Among retirees who left the workforce earlier than expected, 46% say they did so because of a health issue, followed by a job setback (31%) or because they were financially able to do so (11%).

Whether due to the economy, uncertainty over the upcoming election or a myriad of other reasons, peoples’ views on the traditional retirement age also appear to be changing. While the vast majority of retirees (83%) say they were under age 65 the day they left the workforce, many Americans expect to work much longer. Only 20% of workers said they plan to retire prior to age 65 and more than one-quarter (26%) say they plan to remain in the workforce as long as they’re able.

Overall rankings for 2012

The 30 metropolitan areas surveyed are ranked as follows. 2011 ranks appear in parenthesis.

Additional findings, including each area’s preparation and confidence ranking, are also available on the Ameriprise newsroom.

About the survey

The New Retirement Mindscape 2012 City Pulse index was created by Ameriprise Financial utilizing survey responses from 10,063 U.S. adults ages 40-75. The survey was commissioned by Ameriprise Financial, Inc. and conducted online by Harris Interactive from June 13-25, 2012. 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.

About Harris Interactive

Harris Interactive is one of the world’s leading custom market research firms, leveraging research, technology and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries. For more information, visit harrisinteractive.com.

About Ameriprise Financial

At Ameriprise Financial, we have been helping people feel confident about their financial future for over 115 years. With outstanding asset management, advisory and insurance capabilities and a nationwide network of approximately 10,000 financial advisors, we have the strength and expertise to serve the full range of individual and institutional investors' financial needs. For more information, or to find an Ameriprise financial advisor, visit ameriprise.com.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.

© 2012 Ameriprise Financial, Inc. All rights reserved.