The 15th Annual Transamerica Retirement Survey, released by the Transamerica Center for Retirement Studies, finds 65% of Boomers (born between 1946 and 1964) plan to either work past the age of 65 or not retire at all. Most Boomers (52%) say they expect to continue working, at least part time (42%), when they do retire. In addition, most who plan to continue working say it is because of the need for either income or health benefits.
“Many Baby Boomers were hit hard during the Great Recession and, unlike younger generations, they have less time to financially recover before they retire,” says Catherine Collinson, president of the Los Angeles-based Transamerica. According to the survey, Baby Boomers have total household retirement savings of $127,000 (estimated median), an increase from $75,000 in 2007. However, this is not enough to meet retirement needs for many.
This savings shortfall helps explain the sharp increase in Boomers who expect to rely on Social Security as their primary form of income when they retire, which is now 36%, an increase of 10% since 2007.
“The best of intentions to continue working and fully retire at an older age can be easily derailed with a lack of planning,” cautions Collinson. “Baby Boomers are not being sufficiently proactive about taking important steps to help ensure that they continue working beyond 65 or have a Plan B if retirement happens unexpectedly.”
Among Baby Boomers, the survey finds:
- More than half (65%) are staying healthy so they can continue working;
- Forty-one percent are keeping their job skills up to date;
- Sixteen percent are networking and meeting new people;
- Fourteen percent are scoping out the employment market and possible opportunities; and
- Twenty-six percent have a backup plan if forced into full retirement sooner than expected due health issues, job loss or other unforeseen circumstances.
The survey also reveals a pervasive disconnect between Boomers and their employers. While many Boomers have intentions of shifting from full to part-time work as they transition into retirement, only 21% say their employers have programs in place to accommodate such a shift.
“Baby Boomers who are envisioning a transition into retirement that involves working should do a reality check whether their current employers will support them. If not, they’ll need to seek employment elsewhere or pursue something entrepreneurial. All of these scenarios require being proactive and strategic,” says Collinson.
The multigenerational survey finds 52% of members of Generation X (born between 1965 and 1968) expect to self-fund their retirement with 401(k) plans, 403(b) plans, or individual retirement accounts (IRAs). Ninety-one percent highly value 401(k) or similar plans as an important benefit, and among those offered a plan, 84% participate in the plan and participants contribute 7% (median) of their annual salary.
Generation X has been more likely than other generations to take advantage of 401(k) features such as loans and early withdrawals. The survey notes that when these features were introduced, they were thought to encourage plan participation. However, it is now seen they can also eat away at the long-term growth of retirement nest eggs. Twenty-seven percent of current 401(k) participants have taken a loan or early withdrawal.
Gen Xers estimate they will need to save $1,000,000 (median) to retire with a comfortable lifestyle, a profound gap compared to what they have saved to date, according to the survey results. The total household retirement savings for Generation X is $70,000 (estimated median), an increase from $32,000 reported in 2007. This savings gap helps explain why 54% of Generation X plan to work past age 65 or do not plan to retire.
“Generation X will begin turning 50 next year, a loud wakeup call for them to get laser-focused on planning, saving and investing for retirement. Their clock is ticking but they still have time to substantially improve their retirement prospects,” says Collinson.
Millennials (born after 1978) have a different outlook about retirement than their Boomer and Gen Xer counterparts, since they have more time to prepare for it, according to the survey. The majority (60%) of Millennials plan to retire either before or at age 65. While most plan to continue working when they retire, many intend to do so for enjoyment rather than solely for income or health coverage.
“Millennials have heard and responded to the message they need to start early and save as much as possible,” says Collinson. The survey finds 70% of Millennials are already saving for retirement, and started at an unprecedented age of 22.
Two out of three (66%) Millennials expect to self-fund their retirement through retirement accounts (e.g., 401(k)s, 403(b)s, IRAs) or other types of savings and investments. Among Millennials who are offered a 401(k) or similar plan, 71% are participating in the plan, and participants contribute a median 8% of their annual salary. Among Millennials currently participating in their plans whose employers offer a matching contribution to the plan, the survey finds the salary contribution rate increases to a median 10%.
The survey reveals Millennials, being early adopters of digital technologies, are using them to assist with their savings:
- Seventy-one percent say mobile apps to manage their accounts are helpful (compared with 47% of Baby Boomers);
- Sixty-eight percent say mobile apps from their plan provider, including tools and calculators, are helpful (compared with 49% of Boomers); and
- Sixty-one percent say information on social media (e.g., Twitter, Facebook) from their plan provider is helpful (compared with 28% of Boomers).
In addition, 73% of Millennials say they would like more information and advice from their employers about how to achieve their retirement goals.
“Millennials take their retirement benefits very seriously, so much so that two out of every three say they would likely switch employers for a similar job that offered better retirement benefits,” says Collinson.
The survey was conducted online within the United States by Harris Poll, on behalf of the Transamerica Center for Retirement Studies, between February 21 and March 17. Those queried include 1,021 Millennials, 1,120 Generation Xers, 1,805 Baby Boomers, and 197 workers born prior to 1946. Respondents were full or part-time workers in for-profit companies that have 10 or more employees.
More information about the survey, including where to download a related report and white paper, can be found here.