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Education and Action -- How Can Americans Work Toward Achieving Financial Freedom?

04/28/2014 03:30 pm ET | Updated Jun 28, 2014

Pension plans are a thing of the past, the future of social security is uncertain, and baby boomers are rushing toward retirement in record numbers. Now, more than ever, the onus lies on each of us to ensure a financially stable retirement. Yet like most good habits, despite knowing what's "best" for us, Americans are failing to prioritize saving for the future in favor of more pressing (and often short-term) financial concerns.

Capital One ShareBuilder's recent Financial Freedom survey revealed a wide gap between what working Americans think they should be doing when it comes to saving for retirement and what they're actually following through on. In conducting this study, we learned that working adults who plan to retire find it is much easier to talk about retirement than actually save. And while it is encouraging that Americans on average say they discuss retirement with a partner 14 times a year, 57 percent fear they will never save enough to reach that goal.

Ninety-three percent of this same group understands they should be contributing to their retirement but just 72 percent are taking action by actually saving a portion of their income. All of this discussion, education and understanding only translates to 6.4 percent of income being saved.

Time to rethink savings priorities?

While Americans clearly understand the importance of saving for retirement, they haven't moved it to the top of their financial priorities list. A few key strategies can help put Americans on the path to a more financially stress-free future.

Among Americans savings worries, supporting their children and paying for college tops the list as the No. 1 concern at 34 percent, while a much smaller number -- just 13 percent -- say their primary concern is affording retirement.

Of course, parents feel a deep commitment to providing their children the best education they can afford. But prioritizing education over saving for retirement may not be the best strategy for families with limited resources. As pension plans are fast becoming a thing of the past, Social Security is less assured than ever and healthcare costs are rising far faster than inflation, saving for retirement must become a priority for all Americans.

Women appear to be particularly vulnerable: 61 percent (compared to 52 percent of men) say they may never save enough for retirement. Working men also save more than their female counterparts, saving an estimated 7.2 percent of their income, compared to just 5.6 percent for women.

Given the economic hurdles faced by most people -- and particularly working parents -- is there a way through the financial challenges that will make it possible for people to enjoy a comfortable retirement?

Be a financially savvy saver

To be sure, there is no easy solution. But there are tools and resources people can use to educate themselves and make the best possible decisions. Although they may not always follow through by taking action, Americans appear to be weighing where to get their information and what sources to trust.

Men are significantly more likely than women to trust themselves the most for financial decisions, compared to women (36 percent v. 25 percent, respectively). On the other hand, women are more inclined than men to trust their financial advisor or broker (33 percent of women vs. 23 percent of men).

For anyone looking to actively manage their retirement planning and saving, there is one universal principle: Planning is a lifelong process and the earlier it starts the better.

The first step is to identify the resources that are most helpful and relevant. For some, it may be a financial advisor or self-directed online investing platforms like ShareBuilder. Most likely it will be a combination of resources that may include knowledgeable friends or family members, and information from reliable organizations and institutions.

Once a person has a good understanding of available resources and opportunities, it's time to consider taking action. The first step is to work toward maximizing retirement income by contributing as much as possible to tax-advantaged, employer-sponsored retirement plans, IRAs and other savings vehicles. An emergency fund, which will help protect savings in the event of an unexpected and costly event, is also critical.

Do a financial check-up

Other important steps include determining how much to save for retirement. That process will encompass defining goals and a time horizon, and projecting taxes and healthcare costs. Retirement may be a time to start new hobbies or travel or follow unexplored passions. While all of these things can be invigorating and exciting, some of them may be expensive. Take those costs into account as well.

A financial assessment that compares projected income sources (Social Security, investment income, savings, etc.) with expected costs in retirement is also a good idea. With those parameters in place, it's possible to develop a savings and investing plan, determine appropriate asset allocation, and adjust your portfolio. Closer to retirement, develop a plan for disbursing assets and prepare for any lifestyle changes.

Americans are thinking about retirement, but too few are taking action to build a nest egg. More than ever, Americans are responsible for ensuring their own financial security during retirement. Using the resources available to them, it's time to be financial savvy and create a path that helps lead toward long-term security and a well-deserved retirement.

Dan Greenshields is the president of Capital One ShareBuilder, an online investing platform for investors who have long-term financial goals and want to say goodbye to investing complexity.

Securities products are offered by Capital One ShareBuilder, Inc., a registered broker-dealer and Member FINRA/SIPC. Capital One ShareBuilder, Inc. is a subsidiary of Capital One Financial Corporation.

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