Data & Research June 27, 2018

Workers Worry About the Future of Social Security

This is especially a concern, as only 20% believe they are saving adequately for retirement.

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Seventy-six percent of workers last year expressed concerns that Social Security may not be in existence when they retire, the Transamerica Center for Retirement Studies found in a survey, released as “A Compendium of Findings About American Workers.”

“Most workers are counting on Social Security as a meaningful source of income in retirement, and most are concerned about its future,” says Catherine Collinson, CEO and president of the Center and the Transamerica Institute. “Reform is needed to mitigate Social Security’s funding shortfalls, but policymakers have made little progress in identifying and implementing specific changes. Workers need clarity and direction so they can plan accordingly.”

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The survey also found that only 20% strongly agree that they are building a large enough retirement nest egg. While low, this is an improvement from the 11% who said so in the 2013 survey. Forty-four percent of workers say they have financially recovered (24%) or were not impacted (20%) by the Great Recession—a large improvement from the 29% who said the same in 2014.

Only 18% of workers are very confident they will retire will a comfortable lifestyle. Again, this is a low figure, but an improvement from 10% in 2013. Seventy-one percent of workers are offered a defined contribution (DC) plan, up from 68% in 2013. Among those who are offered a DC plan, 81% participate, up from 28% in 2013. They contribute an average of 10% of their salary, up from 7% four years prior.

American workers report that their total household retirement savings amounts to $71,000 (estimated median), up from $53,000 in 2013. Baby Boomers have a median savings of $164,000, up from $103,000 in 2013. Fifty-six percent of workers plan to continue working in retirement, either full-time (14%) or part-time (42%). This is up only slightly from the 54% who planned on continued work in retirement in 2013.

The survey also found that 82% of companies with 500 or more employees have a DC plan, while 59% of companies with five to 499 employees can say the same. Only 55% of Gen Xers are somewhat or very confident they will be able to fully retire with a comfortable lifestyle, compared to 67% of Millennials and 62% of Boomers.

Men report having total household retirement savings of $123,000, compared to $42,000 among women. Thirty-eight percent of men say they have saved $250,000 or more, compared to only 20% of women. Thirty-nine percent of workers making less than $50,000 a year say that Social Security will be their primary source of income.  By comparison, 38% of those making between $50,000 and $99,000 and 49% of those making $100,000 or more say their DC savings will be their primary source of income in retirement.

The Harris Poll conducted the online survey of 6,372 workers for the Transamerica Center for Retirement Studies between last August and October.

Data & Research June 26, 2018

Gen X, Millennials May Have Misguided Retirement Expectations

More than one-third of Gen Xers and Millennials have no retirement savings, and although many expect to rely on Social Security for a major portion of retirement income, they have no intention of maximizing their benefits, a survey finds.

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A focus on Baby Boomers and Millennials may have left Gen Xers in the dust, resulting in stunted retirement preparedness, according to a survey from Personal Capital.

Among pre-retirees, more than one-third of Gen Xers (34%) and Millennials (39%) have no retirement savings despite the fact that most members of both generations (56% and 57%, respectively) expect they will need over $1 million in retirement. Gen Xers are less likely than Millennials to max out their employer sponsored plans, though their timeline to accrue retirement savings is shorter (18% vs 22%).

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Only 24% of Gen Xers and Millennials believe that a skilled financial adviser is key to a comfortable retirement, while 30% of Boomers consider it a crucial part of their plan.

“Despite the hurdles they may have to overcome to reach their retirement goals with a shortened runway, it’s not too late for Gen Xers to get serious about preparedness. Contextualizing savings—or lack thereof—by talking to an adviser or using online resources is a great first step. Americans need a retirement wake-up call, and these findings should serve as the alarm,” says Michelle Brownstein, vice president of private client services at Personal Capital.

Also somewhat alarming is how one-quarter of pre-retirees surveyed expect Social Security to be their primary source of retirement income, including 15% of Millennials and 29% of Gen Xers. Social Security follows closely behind employer sponsored plans (27%) as a top expected revenue stream in retirement.

In addition, more than half (51%) of pre-retirees surveyed by Personal Capital report that they plan to retire at 65 or younger, at least a year shy of maximizing the full Social Security benefit for anyone born after 1943. Millennials plan to retire by age 65 at a higher rate than their peers (62%). Despite expecting early retirement, 32% of Baby Boomers, 34% of Gen Xers and 39% of Millennials say they have no money at all saved for retirement, making reliance on the questionable safety net of Social Security all the more worrisome.

According to survey findings relating to genders, responses show that more women than men understand that sticking to a comprehensive financial plan (62% vs. 47%, respectively) and leveraging a skilled financial adviser (28% and 24%, respectively) are critical to securing a comfortable retirement. However, 40% of women say they do not have any money saved for retirement, compared to 33% of men.

Twenty-seven percent of employed women report they are not offered an employer sponsored retirement plan, in comparison to 19% of working men. Among those who do have access to an employer sponsored retirement plan, female respondents were less likely to contribute to their plans than their male counterparts (58% vs. 67%) or max out their employer sponsored retirement plan (16% vs. 26%).

The survey was conducted online within the United States by ORC International’s Online CARAVAN on behalf of Personal Capital from March 1 through 7, 2018, among 2,008 U.S. adults ages 18 and older. Of the 2,008 total respondents, 1,630 qualified as pre-retirees.

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