Data & Research August 28, 2024

Transamerica Reveals Greatest Retirement Dreams and Fears

While middle-class Americans dream of an ideal retirement, they are increasingly anxious about financial security, according to Transamerica’s latest report.

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For middle-class Americans, the vision of an ideal retirement includes a blend of adventure, connection and personal fulfillment. However, this dream is often tempered by significant fears about financial security, health and the sustainability of essential programs like Social Security.

According to 2023 data cited in Transamerica’s “The Retirement Outlook of the American Middle Class,” the top five retirement dreams for workers making between $50,000 and $199,999 include traveling, spending more time with family and friends, pursuing hobbies, volunteer work and caring for grandchildren.

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The annual report covered a variety of lifestyle and financial responses from more than 10,000 adults and was compiled by the Transamerica Center For Retirement Studies, led by CEO and President Catherine Collinson.

Travel is the most popular aspiration for Americans, with 67% of respondents wanting to explore new places or visit family members across the U.S. Among respondents, 58% reported looking forward to strengthening relationships with their loved ones, while 51% said they hope to pursue hobbies they may have set aside during their working years. Additionally, nearly one-quarter of middle-class Americans said they plan to engage in volunteer activities, and 20% reported looking forward to playing an active role in their grandchildren’s lives.

Notably, one in four middle-class individuals wanted to engage in some form of paid work during retirement. Such opportunities include starting a business, pursuing an encore career or continuing in their current field. Those with a household income between $100,000 and $199,999 were generally more likely to express these aspirations, compared with those earning between $50,000 and $99,999.

On the flip side, retirement dreams are often overshadowed by significant fears about the future. The five most common retirement fears for middle-class Americans included outliving savings and investments (40%), declining health that requires long-term care (40%), the reduction or elimination of Social Security benefits (39%), cognitive decline (33%) and the financial burden of long-term care (32%).

The potential reduction or cessation of Social Security benefits is a looming fear, especially for those with lower incomes. Mental health issues, particularly those related to aging, are also a major concern, especially among those with higher incomes.

Among participants, those with a household income ranging from $50,000 through $99,999 were more likely than their higher-earning counterparts to report fear of the reduction or elimination of Social Security. Conversely, individuals with a household income of $100,000 to $199,999 reported more concern about cognitive decline than those with lower incomes. Additionally, 24% of individuals with a household income ranging from $50,000 through $99,999 cited the lack of affordable housing as a significant retirement fear, compared with  19% of those earning $100,000 through $199,999.

One in three middle-class individuals (34%) reported relying on a professional financial adviser. Those with household incomes ranging from $100,000 to $199,999 were more likely to seek professional advice than those earning between $50,000 and $99,999 (40% vs. 27%).

The Transamerica study results were based on a 25-minute online survey conducted in the U.S. from September 14 through October 23, 2023, among a nationally representative sample of 10,002 adults. The sample included 5,726 respondents with household incomes ranging from $50,000 through $199,999. All respondents were U.S. residents aged 18 and older.

Client Service August 28, 2024

Older Workers Step In as Share of Prime-Age Cohort Falls

A new EBRI analysis indicates older workers continue past traditional retirement age, calling for attention by employers to retirement plan design.

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Older workers are holding up the labor force for their younger counterparts, according to new analysis from the Employee Benefit Research Institute.

According to the paper released Monday analyzing the U.S. civilian labor force through December 2023, many in the Baby Boomer generation that should be heading into retirement are still working—often in roles that might otherwise be held by prime-age workers of between 25 and 64, according to report authors Craig Copeland and Kyle Bedu.

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The share of the labor force considered “prime working age” has fallen “significantly” since the mid-1990s, the authors wrote. With the decrease coming predominantly from these ages, either younger or older workers are needed to cover the gaps.

“So far, the older population has been filling the gap in the labor force, as those younger than age 25 are at near-record-low levels for their share of the labor force,” the authors wrote.

The findings reinforce a current trend of retirement-age workers continuing to punch the clock well past traditional quitting time. That may have implications for how employers manage benefits such as 401(k)s and financial education programs, says Copeland, EBRI’s director of wealth benefits research.

“A significant percentage of the labor force is ages 55 or older, so employers need to be thinking about how to design these programs with those workers in mind,” he says. “At the same time, there is a growing number of younger workers in the labor force. The middle-aged workers or Gen X is smaller, so employers need to think about the old and the young as they design their plans. It is important to have income and growth options to cover the needs of both age groups.”

Generational Focus

Copeland says employers should consider the different educational needs of the groups, with older workers needing advice on how to turn assets into retirement income in a tax-efficient way. For younger workers, the focus should be on accumulation, while also considering needs such as emergencies and home purchases.

In the report, Copeland also noted that members of the Baby Boomer generation are almost all at least in their 60s, and Gen X is much smaller, so a “decrease in the share of workers ages 55 or older is imminent.”

Just how fast that decrease happens will depend on how long Baby Boomers keep working, which, as separate surveys have pointed out recently, may also depend on how confident they are in having enough retirement income to last the remainder of their lives.

In a retirement outlook report published by Transamerica’s retirement studies center Wednesday, the greatest “retirement fear” middle class people considered was “outliving savings and investments.” On the plus side, 69% of the survey sample of 5,726 people said they are “confident they will be able to fully retire with a comfortable lifestyle.”

Copeland notes that older workers are remaining in the workforce likely due to a combination of the jobs being available and the necessity of not having enough saved.

“Many people continue to work because they can and have jobs that are meaningful to them,” he says. “However, there are those who are behind in their savings and need to continue to build up assets or hold off drawing down their assets. The first circumstance could call for more flexible options within the plan such as in-service withdrawals, while the second circumstance could [call for] increasing contributions and maximum growth in the short term.”

The graying of the workforce, according to the authors, started in 2008, when the U.S. population aged 16 or older became increasingly made up of those ages 65 or older. By 2023, that cohort made up the largest share of the population. Meanwhile, Americans aged 16 through 24 made up the smallest proportion of the U.S., and those aged 45 through 54 made up the second smallest, according to EBRI.

Interestingly, as much as older workers are filling in the labor gap, their labor force participation rates are still not at pre-pandemic levels, according to the researchers. Prime-age worker participation, however, is back to the level seen before the pandemic rocked the workforce.

Other Areas 

The authors also considered labor force participation rates by age and gender.

In age and gender, the authors found that, while women make up the largest proportion of the population “by a sizable margin,” men make up a comparatively larger share of the labor force, particularly among middle-aged workers; the gender gaps shrinks for younger and older age ranges.

In terms of overall labor force participation, more women are in the workforce than in the past, though labor participation rates have dropped for both men and women since 2008.

In addition, the authors found that labor force participation rates for Black and Hispanic Americans increased sharply from 2021 through 2023 after a drop in 2020.

EBRI’s research used data from the U.S. Census Bureau’s Current Population Survey going back to 1975.

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