Yesterday we briefly mentioned a new report from the Transamerica Center for Retirement Studies in relation to the growing number of older Americans who plan to continue to work well past the traditional age of retirement. This study is worth taking a second look at due to the handful of other interesting findings contained within.
For example, 61 percent of surveyed U.S. workers said that they still do not feel like they have fully recovered from the “Great Recession,” and 7 percent actually said that they believe they may never recover. At the same time, more than three-fourths (77 percent) of respondents reported being concerned that Social Security will not be there for them when they are ready to retire, and 82 percent said that they at least “somewhat agree” with the following statement: “Compared to my parents’ generation, people in my generation will have a much harder time in achieving financial security.”
Forty-one percent of surveyed workers said that they expect their standard of living to decrease when they retire, and the top reported old-age fears for respondents were outliving their savings and investments (51 percent), Social Security being reduced or ceasing to exist in the future (47 percent), declining health that requires long-term care (45 percent), and not being able to meet basic financial needs (42 percent). Moreover, only 51 percent of surveyed workers said that they are confident they are building a large enough retirement nest egg, and 65 percent reported doubts about hitting their long-term saving targets by the time they reach the traditional age of retirement.
When it comes to generational differences, a third of surveyed Baby Boomers (born 1946 to 1964) said that they expect Social Security to be their primary source of retirement income, and 78 percent also plan to tap into 401(k)s, 403(b)s, and IRAs. The median household savings in all retirement accounts among Baby Boomer respondents was $147,000. That is arguably low but the report’s authors noted that many Baby Boomers were already mid-career when 401(k)s were first introduced, and therefore have not had a full 40-year time horizon to take advantage of these plans.
As for Generation X (born 1965 to 1978), 77 percent of surveyed workers in this age cohort said that they are currently saving for retirement, with a median starting age of 28, but only 12 percent reported being “very confident” that they will be able to fully retire with a comfortable lifestyle. Encouragingly, Gen X workers who are participating in a 401(k) or similar plan said that they contribute 7 percent (median) of their income each year to these vehicles, well above the 3 percent default rate seen in many defined contribution plans.
Surveyed Millennials (born 1979 to 2000) most frequently (55 percent) cited self-funded savings as their expected primary source of retirement income, and just 17 percent said that they anticipate to depend mainly on Social Security in old age. This optimistic outlook may be justified because 72 percent of Gen Y respondents reported that they have already begun saving for retirement, with a median starting age of 22. Further, surveyed Millennials were more likely to be currently contributing to a Roth style 401(k), which makes sense given this age group’s relatively strong likelihood of being in a higher tax bracket later in life.
Sources: Transamerica Center for Retirement StudiesPost author: Charles Couch