Debt Stands in the Way of Retirement Readiness

A majority of Americans surveyed admit that saving for retirement is not their top priority.

Eighty-one percent of working age people surveyed by HSBC Bank said saving for retirement is not their main priority.

Other priorities included paying off debts (24%), saving for children’s education (8%), saving for a rainy day (8%) or a vacation (6%).

The survey found major life events have affected more than three-quarters (76%) of pre-retirees’ retirement saving. While some of these events can be planned for, such as buying a home or paying a mortgage (27%) or starting a family (13%), unexpected events can also have a significant impact.

Nearly twice as many (33%) widowed or divorced retirees say their financial situation is worse than expected, compared with just one in five (18%) of those who are married. In addition, more than one in ten (14%) working age people faced an unexpected illness that stopped them or their spouse from working, with a knock-on effect on their retirement saving.

The global economic downturn has also had a far-reaching impact. Nearly one-third (30%) of pre-retirees say it had a direct and significant impact on their ability to save for retirement. It is also likely to have had an indirect effect on pre-retirees’ economic wellbeing, with one-quarter saying that losing their job (27%), getting into debt/having severe financial difficulty (25%) or seeing a significant drop in their earnings (25%) affected their ability to save for retirement.

Compared to before the recent global downturn, many working age people have either stopped or reduced their retirement saving, whether through cash deposits (25%), investments (24%), annuities (23%), personal retirement accounts (21%) or employer-sponsored retirement accounts (20%). However, as the country recovers from the global economic downturn, financial confidence for some is increasing, with 41% of pre-retirees feeling more confident about their future financial prospects than a year ago.

When it comes to good ways to generate income for retirement, retirees have the most confidence in employer-sponsored retirement plans (70%) and investment accounts (68%), followed by cash deposits (63%) and personal retirement accounts (60%). Working age people feel less confident than today’s retirees that employer-sponsored retirement plans (60%), personal retirement accounts (49%) and annuities (44%) are good ways to generate income for retirement.

With the benefit of hindsight, many retirees said they would have done things differently before they retired to improve their standard of living in retirement. For example, nearly two in five (37%) would have started saving at an earlier age and 30% would have saved more.

While nearly half (47%) of retirees say retirement planning should start at the latest by the age of 30 if one wants to maintain a similar standard of living after retirement, just more than one-third (34%) of pre-retirees think they need to start at this age.

One-quarter (25%) of pre-retirees are either not currently saving for their retirement or do not intend to start, according to the survey results. Even among pre-retirees nearer to retirement—those age 45 and older—one-fifth (20%) are not saving or do not intend to start saving specifically for retirement. Notably, more than two in five (42%) retirees who did not prepare adequately for a comfortable retirement say they did not realize that their preparation had fallen short until it was far too late, at or after they had fully retired.

HSBC's “The Future of Retirement, A balancing act,” report is based on an online survey of more than 16,000 people in 15 countries and territories. U.S. findings are based on a nationally representative survey of 1,000 people of working age (25 and older) and in retirement. It was conducted online by Ipsos MORI between August and September 2014.

For more information about “The Future of Retirement,” and to view all previous global and country reports, visit