Americans realize retirement will be the biggest purchase of their lifetime—at
2.5 times the cost of an average home—81% say they do not know how much money
they will need to fund their retirement, according to a study from Bank of
America Merrill Lynch, in partnership with Age Wave.
people say they want to live to the age of 90, only 27% of pre-retirees ages 50
and older feel financially prepared to fund a retirement that lasts 10 years,
let alone 20 to 30 years. The study found Americans are saving only a fraction
of what they think they should: 5.5% vs. 25% of their annual income, after
half of Millennials feel a secure retirement is beyond their reach, compared
with 30% of Baby Boomers who feel this way. And Millennials expect 65% of their
retirement income to come from personal sources, including other savings and
continued employment, far more than have earlier generations.
biggest retirement-related financial worries for most Americans are a costly
health issue affecting them or a loved one; inflation; and having too little
money to do what they would like. Respondents to a survey used in the study
said handling basic expenses and prioritizing paying down debt are the two
biggest barriers to saving more for retirement. And they are far more concerned
about their own economy than the economy.
saving for retirement, the top incentives that got them onboard were an
employer offering a retirement savings plan (46%) or information about
retirement benefits (26%), rather than reaching a certain age.
half of pre-retirees age 50 and older said they are without a positive
role model when it comes to financial planning, and 65% of all respondents said
the language of finance is confusing and not user-friendly. “This opens doors
for employers to play an even larger role in empowering Americans to
financially prepare for their futures,” says Kevin Crain, head of workplace
financial solutions at Bank of America Merrill Lynch.
to the study said they are willing to make certain course corrections to
improve their financial security in retirement.
percent would make healthier choices to reduce potential expenses in later
life, and the same percentage would use more generic medications and supplies.
Sixty-eight percent said they would consider purchasing long-term care
would be willing to work longer—preferably part-time—to shore up their savings,
although only 43% would want to work full time; 67% would be open to learning
new skills to be able to work at something different; 70% would consider
cutting back on support to adult children; and only 30% would ask family
members to provide help to them.
four would downsize their home to lower ongoing costs and benefit from the
equity. Sixty-seven percent would be willing to move to a less expensive
location, and 47% would consider selling their home and renting an apartment.
95% said they would prefer to have more enjoyable experiences than buy more
things; 81% would increase use of community recreation programs; and 70% would
be willing to stay with friends or family when traveling to reduce costs.