Data & Research January 3, 2019

Majority of Americans Think They Are on Track for a Secure Retirement

However, they are worried about health care costs.

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Nearly two-thirds, 65%, of Americans are confident they have saved enough, or will save enough, to retire comfortably, Kiplinger’s Personal Finance learned in a survey. However, 22% are worried about high health care costs in retirement.

Eighty-five percent of those under 50 and 67% of those 50 and older expect to work full time as long as possible before retiring. Forty-seven percent expect to continue working after retiring. Forty-five percent are confident that Social Security will provide the income they expect.

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On average, Americans have saved $327,090 for retirement, saving an average of 13.3% of their annual income. Those making more than $100,000 a year have saved $670,810, and those making less than that have saved $180,200. Seventy-two percent of those with a mortgage expect to pay it off before retiring.

Overall, people are contributing an average of $11,910 to their workplace retirement plan each year. Among those with household incomes more than $100,000, they are contributing an average of $17,710, and those with household incomes of less than $100,000 are contributing $8,240.

Men think they will need a $985,929 nest egg to be able to retire, and women think they will need $828,360. Overall, people said they think they will need a $909,000 nest egg. Those with household incomes of more than $100,000 think they will need $1.5 million, and those with household incomes less than $100,000 think they will need $648,000.

Sixty-one percent of those with a long-term financial plan are working with an adviser. They median age at which respondents expect to retire is 64.7.

Seventy-three percent have a workplace retirement plan, 56% have a traditional individual retirement account (IRA), 42% have a Roth IRA, and 20% have an annuity.

Fifty percent of respondents expect to receive a pension, and among this group, 66% will take it as an annuity. The median amount they expect to collect is $2,190. The median expected percentage of income from Social Security is 30%.

Twenty-five percent would consider purchasing an immediate annuity. Twenty-three percent have long-term care insurance, and among those without this type of insurance, 30% would consider purchasing it in the future.

Among those who do not think they are saving enough for retirement, 28% say it is due to high health insurance and medical costs, 24% say it is due to disappointing investment performance, and 15% say it is due to debt other than student loans.

Thirty-four percent are considering relocating during retirement, with the top reasons being lower taxes, lower cost of living, warmer climate and to be with family.

Data & Research January 3, 2019

Finance’s Reputation Problem Impacts Auto Retirement Plan Success

Industry pros know there are big differences between financial services providers in termsof  business models and their willingness to embrace fiduciary best practices—but many non-investors see a monolithic industry sharing a set of common reputation problems.

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New survey data shared by The Pew Charitable Trusts takes a deep dive into the perspectives of nearly 1,000 workers who do not have access to a retirement plan on the job, with the goal of learning how trustworthy they find information from their primary financial institution and their human resources colleagues.

According to John Scott, director of The Pew Charitable Trusts’ retirement savings project, and Henry Watson, an associate with Pew’s research review and support team, the results suggest “an association between distrust in financial institutions and the likelihood that workers will choose to stay in a retirement savings plan if enrolled automatically.”

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The Pew survey found that nine in 10 of these workers without access to a workplace retirement plan said they find information from their primary financial institution “somewhat” or “definitely” trustworthy. A little more than seven in 10 said the same about information from financial institutions in general or their human resources representative. Still, the researchers warn, substantial shares do not find information from these sources trustworthy.

“The survey found that white workers were somewhat less likely to distrust financial information than Hispanics or other nonwhite respondents,” the researchers note. “Among white workers, only 7% said information from their primary financial institution is ‘somewhat’ or ‘definitely’ untrustworthy, compared with 17% of Hispanic individuals and 19% of other respondents.”

Previous Pew research shows that Hispanics are among those least likely to have access to workplace retirement plans, making their somewhat greater apprehension toward financial institutions of particular concern. Separately, according to Pew, men are more distrustful of financial institutions in general than women, as 33% said these institutions were definitely or somewhat untrustworthy, compared with 22% of women.

Of note for the PLANADVISER readership, respondents who said they lacked confidence in financial institutions generally were more likely to say they would “probably” or “definitely” choose not to participate in an employer-sponsored plan if automatically enrolled. About four in 10 of those who expressed distrust in their primary financial institution said they would opt out, according to the Pew survey, with 12% saying they definitely would do so.

Survey respondents were asked separately about whether they would take part in a hypothetical automatic-enrollment savings plan sponsored by their state, rather than their employer. Among those who said they distrust information from their primary financial institution, 13% would opt out and 23% were unsure, somewhat more than the 9% and 15%, respectively, of those who said they trust this institution. More than six in 10 would either stay in the program at the default contribution rate or increase that rate.

The Pew researchers conclude these results “should encourage auto-IRA program designers,” although some workers may require special outreach to specifically address their concerns.

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