Financial Uncertainty Pushes Americans to Rethink Retirement Plans

As retirement draws nearer for millions of Americans, concerns about post-retirement finances are rising.

As retirement approaches for millions of Americans, the path forward appears increasingly uncertain, with many expressing concerns about how they will generate income in their post-work years.

According to the 2024 Schroders US Retirement Survey, the results of which were released Thursday, nonretired Americans expect to draw on a range of income sources beyond Social Security when they do retire, with 60% planning to rely on cash savings and 48% counting on their workplace 401(k), 403(b) or 457 plan. Other top sources include a spouse’s retirement plan (37%), investment income (36%) and a spouse’s pension plan (27%).

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Despite 51% of nonretired Americans expressing concern about outliving their retirement savings, many plan to file for Social Security earlier than full retirement age. The most popular ages cited by respondents at which they plan to begin claiming their benefits were 65 (23%) and 62 (12%). In total, 43% reported intending to claim before reaching age 67—the full retirement age for those born after 1960—while only 10% plan to wait until age 70, which would allow them to receive the maximum monthly benefit.

Furthermore, the Schroders survey revealed that 53% of retirees simply withdraw money when needed, with only a minority employing more structured approaches. The most common sources for capital include dividend-producing stocks or mutual funds (23%), systematic withdrawals from retirement accounts (22%) and certificates of deposit (17%).

Concerns about income generation extend beyond retirees, with 88% of nonretired Americans expressing at least slight unease about not knowing how to best generate income in retirement. Additionally, nonretirees expect to need an average of $4,947 per month to live comfortably—significantly more than the average of $4,258 per month that current retirees report receiving.

Delaying Retirement

Amid this uncertainty, many workers appear to be delaying their retirement plans. The 2024 Global Benefits Attitudes Survey from WTW found that financial concerns are leading older Americans to work longer or phase into retirement gradually. According to the survey results released Wednesday, 34% of workers aged 50 and older have either started reducing their work hours or responsibilities as they near retirement (15%) or intend to do so (19%).

This phased approach to retirement allows older workers to maintain a level of financial security while transitioning into retirement over a longer period, according to WTW. For example, employees who begin phasing into retirement at age 59 expect to continue working for an additional nine years on average. Most of these individuals have opted to reduce their work hours (61%) or take on fewer job responsibilities (41%), while others are exploring changes in their roles or work environments, such as shifting to more remote work.

When asked about the key drivers behind their retirement decisions, financial security emerged as a major factor for 76% of respondents, followed by health concerns (50%) and the desire for more time with family, leisure and travel (45%).

The survey found a larger percentage of people looking to their employer-sponsored retirement plan to meet their needs, with 72% identifying it as their primary savings tool for retirement. Moreover, 55% of employees consider their retirement plan a significant factor in remaining with their current employer, a rise from 48% in 2017.

The Schroders 2024 US Retirement Survey was conducted among 2,000 U.S. investors ages 28 through 79 from March through April, while the WTW Global Benefits Attitudes Survey polled 10,000 U.S. employees working in medium and large private companies across various industries from January through March.

Product & Service Launches – 8/23/24

Custodia Financial introduces retirement loan protection service to protect against defaults; Prudential enhances its employee well-being solutions; and Lincoln Financial expands care services for beneficiaries.

Custodia Financial Offers ‘Retirement Loan Protection’ Insurance Product

As many workers struggle to avoid defaulting on workplace retirement plan loans, Custodia Financial LLC has introduced retirement loan protection—an insurance solution provided to participants from the employer that provides protection for 401(k) or other employer-sponsored plans and ensures participant savings “remain intact.”

For example, if a participant loses their job, Custodia will take over their loan payments during the months they search for a new job. Some of the offering’s benefits include immediate availability with no technology integration or enrollment period and a “seamless activation process.”

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Employers pay for RLP, and it can be done through plan assets.

“Plan assets will typically take priority over the company paying, but we expect this to vary by industry and plan size,” said a Custodia spokesperson. “The current split is relatively even. Additionally, we emphasize that pre-existing budgets for benefits, financial wellness, HR, inclusion, and—importantly— retirement plan forfeiture accounts are all viable sources to cover the expense. Regardless of source, the payment is tax deductible.”

Prudential Launches Enhanced Employee Well-Being Solutions

Prudential Group Insurance has added enhancements to its well-being program with the launch of a digitally accessible hub, offering a new access point to solutions and partnerships aligned with the company’s life, absence and disability products.

Through the digital hub, Prudential is improving access to benefits that help employees who are welcoming a new child, changing jobs or coping with a disability or leave event.

The well-being solutions include live financial education, caregiving support, behavioral health tools, debt management and housing counseling to help develop an action plan to achieve goals.

“We continuously hear from employers that they are looking for increased utilization of programs that support their employees’ well-being,” stated Jessica Gillespie, Prudential’s head of group insurance product and underwriting, in a press release. “Our comprehensive program connects employees with the right resources at the right moment through alignment with our life, absence and disability products. The new digital hub adds a simple way to access and utilize these tools.”

Lincoln Financial Expands Care Services for Beneficiaries

Lincoln Financial Group has launched new grief support services for Group Life beneficiaries, “providing care beyond the claims process.”

The new service, provided by Empathy—a comprehensive support system for the bereaved—can help families navigate the logistical aspects of loss, including estate settlement, executing a will and more.

These services are now automatically available to all customers who have purchased Lincoln Group Life insurance through the workplace and to the beneficiaries of their policies.

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