Retirement Savings: How Much Is Enough?

The magic number is $1 million.

That’s the amount a jeweler needs to have for a reasonable retirement, according to our informal survey of retailers throughout the United States. Most respondents say it’s an attainable goal, but for many, it’s going to be a long haul getting there. As of today, the median value of jewelers’ retirement accounts is only $300,000.

The poll shows that jewelers’ financial goals for retirement, and the current standing of their rainy-day funds, vary widely. Some aren’t putting aside any savings, arguing they’ll never quit working, will finance their final years from the sale of the business, or will rely on Social Security. Others have stashed away anywhere from a few thousand to a half-million or more. About one in seven respondents already is a millionaire.

The most modest goal is to go into retirement with a scant $40,000 on tap. But the single most-often-specified target is $1 million. About one in five respondents picks that as the amount required for all reasonable retirement needs. As the median indicates, though, half the respondents want more. The next big financial landmark is $2 million, but a significant number of store owners say that’s not enough. Quite a few say $3 million to $5 million is a better guarantee of a good standard of retirement living. The top goal is $10 million.

Where a jeweler does business has an impact on retirement planning. The median million-dollar figure is endorsed by jewelers in the West, Midwest, and Northeast, whereas their colleagues in the South say they’d up that figure to $1.5 million. Regarding savings on hand, 59% of Southerners have put away more than $250,000, compared with 65% of jewelers in the Northeast, 48% of jewelers in the West, and only 37% of those in the Midwest.

On the other hand, Southerners are least confident about meeting their financial goals. Only 79% are sure they will amass all the assets they’ll need for retirement, while 96% of Westerners say they’re confident they’ll meet their goals.

This survey was directed primarily at finances and how jewelers are working to meet their retirement needs. But it uncovered what could be a disturbing trend for an industry based on the tradition of family business. Just about half of the store owners polled say they don’t expect a relative to buy the business when they retire. (This figure rises to a startling 68% of all stores polled in the Southern states.) And only one in four expects the family to take over upon his or her retirement. Another one in four is uncertain what’s going to happen – often because the owner is still so young that the issue of succession is too far off to settle.

Building the nest egg. Individual Retirement Accounts (IRAs) are the most favored saving vehicle for jewelers, closely followed by personal savings accounts and investment in real estate. Westerners and Southerners are more likely to invest in real estate than their colleagues elsewhere.

When it comes to investing funds in IRAs or 401(k) plans, jewelers are most likely to favor mutual funds, with stocks their second choice.

Once again, regional differences are evident. In the West, for example, there’s a coolness toward stocks and bonds with an enthusiasm for real estate and the jeweler’s own stock in trade – gold, gemstones, and jewelry itself. Jewelers in the Northeast also seem shy about common stocks; more cautiously, they favor money market or other personal savings accounts. By contrast, Midwestern and Southern jewelers far outdistance the average with their stock market investments.

Most jewelers turn to professionals for financial advice, and accountants are the No. 1 choice. Next come financial planners, then stockbrokers. Lawyers are not much in favor.

The dominance of mutual funds as the preferred place to hold retirement savings is clear. About one jeweler in four has 75% or more of total retirement savings invested in mutual funds; no other form of investment comes close to this level.

When the day for retirement finally comes – a day quite a few jewelers say they dread – most will stay put in their home towns. For the panel as a whole, only 22% say they’ll move, mostly jewelers in the Northeast who want to get away from frozen winters into the warmth of Florida, Arizona, and, for a few, the Carolinas. Westerners are the least likely to move, some arguing that if you live in Paradise there’s no point in giving it up.

Barbara Wenger, assistant editor, and Larry Frederick, editor-in-chief, helped in the preparation of this article.

WHERE THEY BUILD THE NEST EGG
Here are what jewelers say will be the main sources of their retirement income; (% of total mentions; most jewelers have two or more of these sources):

All jewelers West Midwest Northeast South
Mutual funds 31% 32% 33% 31% 25%
Common stocks 25% 21% 29% 18% 29%
Bonds 14% 11% 14% 13% 16%
Cash equivalents (savings, money market funds) 14% 15% 13% 18% 15%
Treasury notes 6% 4% 5% 8% 6%
Collectibles (antiques, paintings, etc.) 6% 6% 4% 7% 6%
Other 4% 11% 2% 5% 3%
Source: JCK questionnaire mailed to 409 jewelers in May. Responses: 145. Response rate: 35%.

THE BEST INVESTMENTS
Here are what jewelers choose as the best places to invest retirement funds when they have the choice to do so (% of total mentions; most jewelers use two or more of these investment options):

All jewelers West Midwest Northeast South
All jewelers West Midwest Northeast South
Individual Retirement Accounts (IRAs) 28% 27% 25% 33% 26%
Non-retirement or personal savings accounts 23% 19% 21% 27% 27%
Real estate investments 18% 23% 17% 12% 21%
Corporate pensions 11% 12% 11% 8% 12%
401(k) accounts 10% 9% 17% 10% 5%
Other * 10% 10% 9% 10% 9%
* Includes real estate, gemstones, classic cars, and insurance

PREPARING FOR THE GOLDEN YEARS

% of jewelers who say they’re putting away savings for retirement: 88%
% who are not: 12%
Here’s how the non-savers say they hope to finance retirement:
Don’t retire, go on working: 36%
Rely on Social Security: 29%
Sell the business: 20%
Rely on an inheritance: 9% 9%
Other *: 6%
* Includes expecting the kids to support them, relying on military pension, and expecting to die before retirement becomes an issue

STASHING IT AWAY
Respondents say that, as of now, they have put away a median $300,000 toward the goal of financing a comfortable retirement. The greatest extremes are in the West, where one starting-out-saving retailer has yet to put away his first dollar for retirement and where another has already invested more than $3 million. Here’s how the current savings picture shapes up:

% responding
All jewelers West Midwest Northeast South
Less than $100,000 19% 19% 26% 20% 33%
$100,000-$250,000 27% 33% 37% 15% 8%
$251,000-$500,000 23% 14% 22% 30% 17%
$501,000-$1 million 17% 24% 8% 15% 25%
$1 million+ 14% 10% 7% 20% 17%

THE PROMISED LAND
Jewelers’ ideas of how much money they’ll need to finance a retirement that lets them maintain a pleasant life vary greatly. The median suggested is $1 million, but the range runs all the way from $40,000 to $10 million. Here’s how the goals compare:

% responding
Retirement Savings Goal All jewelers West Midwest Northeast South
Less than $500,000 9% 8% 4% 12% 19%
$501,000-$1,000,000 41% 50% 52% 56% 19%
$1,000,001-$2,000,000 31% 15% 26% 32% 38%
$2,000,001-$4,000,000 13% 27% 11% 0% 12%
$4,000,000+ 6% 0% 7% 0% 12%

AND WHEN THEY QUIT…
Some respondents say they’ll never quit; they’ll just go on working until they drop, literally. But most do accept that one day they’ll leave the business. The big question is, “To whom will they leave it?” Surprisingly few are confident that the business will stay in the family.

% responding
Who will get the business? All jewelers West Midwest Northeast South
A family member 24% 19% 27% 21% 27%
An outsider 48% 44% 40% 39% 68%
Don’t know 28% 37% 33% 40% 5%