Four in 10 Americans have considered delaying retirement at least once during the past twelve months, according to a recent T. Rowe Price survey. That is up from 35 percent in 2015 but most of the increase appears to be due to younger respondents, particularly Gen-Y. Compared to previous surveys, a slightly smaller percentage of surveyed Millennials also said that they are comfortable about their level of retirement preparedness. Since the labor market has continued to tighten in recent years and wage growth has shown signs of accelerating, the slightly more pessimistic outlook from young adults probably has to do with a growing awareness of how challenging it may be to adequately fund retirement.
Indeed, medical advancements are allowing people to live longer than ever before, but the use of defined benefit pension plans has declined, and Social Security is expected to provide lower benefits relative to income in the years ahead. All of this means that self-funding will play an increasingly important role in the way Americans prepare for retirement. Encouragingly, 45 percent of surveyed Millennials said that have raised their 401(k) contribution rate during the past twelve months, and a majority of respondents cited “taking full-advantage of employer matching contributions” as one of their main reasons for doing so. Many employers also appear to recognize the various benefits that come from offering their workers access to a 401(k) plan.
For example, a study by J.P. Morgan found that 75 percent of surveyed businesses reported that they consider helping their employees achieve a financially secure retirement as being a major reason why they sponsor a 401(k) plan. Another 66 percent of employer respondents said that 401(k) access will make it easier for workers to retire on time (at their targeted retirement age). However, even more surveyed plan sponsors stated that they believe offering workers access to a 401(k) can help retain quality employees (83 percent), demonstrate their business’s level of caring about its workers (82 percent), increase the general financial security of employees (78 percent), aid in recruiting top talent (76 percent), and improve overall employee engagement (75 percent).
Sources: T. Rowe Price, J.P. MorganPost author: Charles Couch