However, the research also reveals some potential shortcomings with that “strategy” – not only are many American workers largely unprepared for retirement, but relatively few have a backup plan in the event they are forced into retirement earlier than planned.
According to The Center’s research, 40% of respondents expect to work longer and retire at an older age since the recession began. Altogether, 39% of American workers plan to retire after age 70 or not at all and over half (54%) of workers plan to work in retirement. Of those who plan on working after retirement or age 65, the most commonly cited reason is – out of necessity (44%).
The results of the 12th Annual Transamerica Retirement Survey—conducted among 4,080 American workers (all full-time or part-time)—found that for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65.
Strikingly, a full one-in-five of Generation Y workers “strongly believe” that they could work until age 65 and still not have enough saved to meet their retirement needs (though that’s only about half the rate among Baby Boomers), and more than half (52%) “somewhat believe” in that reality. On the other hand, the participation rate of those Gen Y workers in company retirement plans was 70% in the research, much improved from the 53% in 2007, and not too far behind the 75% reported for the Boomer cohort (which, however, was down from 82% in 2007).
Asked to expand on the apparent pessimism of the Gen Y group, Catherine Collinson, president of the Transamerica Center for Retirement Studies, acknowledge that these “Echo Boomers” may, in fact, be reflecting some of the pessimism of their parents.
While many workers may plan to work past the traditional retirement age or never retire, unforeseen circumstances could force them to stop working before they planned. The 12th Annual Transamerica Retirement Survey—conducted among 4,080 American workers - found the majority of workers are unprepared for this scenario; 70% agree they could work until age 65 and still not have enough money saved to meet their retirement needs.
Moreover, this sentiment spans across age and income:
- 69% of those in their twenties and 72% of those in their thirties agree they could work until age 65 and still not have enough money saved.
- 80% of those with a household income (HHI) of less than $50,000 agree, as do 74% of those with an HHI $50-$100,000, and 59% of those with an HHI over $100,000.
Meanwhile, about a third of workers (31%) anticipate not just needing to provide for themselves in retirement, but for additional family members as well.
“With all of life’s uncertainties, planning not to retire is simply not a viable retirement strategy,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Planning to work past age 65 is an important opportunity to continue earning income, save more, and help to alleviate a retirement savings shortfall; however, it’s important that workers be proactive in setting a retirement savings goal, saving and investing for retirement, and having a backup plan if they are forced to retire sooner than expected.”
The survey found that most (82%) of surveyed workers either do not have, or are not sure if they do have, a backup plan in place in the event they cannot work as long as they need to. Even more – 87% - of the group who plan to work past age 70 or never retire feel that concern.
“In today’s society, it’s more important than ever for workers to take personal responsibility for achieving a financially secure retirement. Our research highlights the risk American workers are taking by not having a backup plan in place in the event they are forced to retire sooner than expected,” says Collinson.
Nearly half (44%) of American workers lack a strategy to reach their retirement goals, but even of those who claim to have a plan, only half have factored in healthcare costs and just one-fifth have factored in long-term care insurance. Additionally, just 57% of workers have factored in Social Security and Medicare benefits, though that may be just as well; just 40% claim to know quite a bit or a great deal about Social Security, only 28% say they know quite a bit or a great deal about Medicare and a mere 23% claim to know quite a bit or a great deal about Medicaid.
The research notes that while American workers estimate their median retirement savings needs at $600,000, less than one-third (30%) currently have $100,000 or more saved in all household retirement accounts. Little wonder that the top fears about retirement cited were “outliving my savings and investments” (23%) and “not being able to meet the basic financial needs of my family” (21%). However, the concern that Social Security would be reduced or eliminated in the future was cited by 15%, and the high cost of healthcare loomed large for 12%.The survey results are online at transamericacenter.org.