Resources

How Do Middle Class Americans Feel About Retirement?

 For a snapshot of how Americans are feeling about retirement we reviewed the 24^th Annual Transamerica Retirement Survey. The survey provides valuable insights into the health and well-being, employment status, personal finances, and retirement outlook of middle-class U.S. residents and is conducted by the research team at Transamerica Institute and Transamerica Center for Retirement Studies (TCRS).

Survey respondents were prompted to answer the following questions:

• What are your hopes and dreams?
• What is your current financial situation?
• What is your retirement outlook?

Included below are a few key findings from this year’s survey.

Happiness, Healthy Aging, and Longevity

Many surveyed hope to live long lives and view enjoying life as a top priority. There is the potential for people to live longer now due to advancements in medical technology, research into aging, and improved lifestyle practices. Most survey respondents hoped to live to age 90, with 14% hoping to live to age 100 or older.

Retirees were also asked what their plans were for long-term care. More than half plan to rely on family and friends if they need help with daily activities and/or nursing care, including 37% who plan to rely on their spouse, 30% who plan to rely on family members, and 4% who plan to rely on friends. As the American population ages and the cost of long-term care continues to rise it is crucial to factor in estimated healthcare costs when saving for retirement.

Saving, Investing and Planning for Retirement

Many survey respondents are expecting to rely on Social Security, workplace retirement plans, and personal savings for income in retirement. More than three in four working respondents are saving in an employer-sponsored plan or through an account outside of the workplace. The majority of retirement income that Americans expect to receive will come from employer sponsored retirement plans:

• The sources of retirement income cited most by those surveyed were self-funded, including savings from 401(k)s, 403(b)s, IRAs or other savings and investments.
   
• Other sources included Social Security (72%), a company-funded pension plan (29%), income from working (27%), home equities (17%), and receiving an inheritance (13%).

Retirement Savings Calculations  

The amount of savings needed in retirement varies from person to person and will depend on their expenses, what they have been able to save, and their desired lifestyle in retirement:

• While workers surveyed estimated they will need $500,000 by the time they retire in order to feel somewhat financially secure,
   
• More than 40% estimated they will need to save $1 million or more to have a comfortable retirement.

Among those providing an estimate, 50% guessed the amount they need to save for retirement, 37% based their estimate on current living expenses, 18% on expected investment earnings, 12% on reading/hearing how much is needed, and 10% were given the targeted amount by a financial advisor.

Reasons for Tapping into Retirement Savings

Interestingly, a concerning percentage of middle-class workers are tapping into their retirement savings before they retire:

• Over 30% have taken a loan, early withdrawal, and/or hardship withdrawal from their 401(k) or similar plan.

• 17% have paid it back in full.

• 8% have taken a loan and are paying it back.

• 6% have taken a loan that they were unable to pay back.

Among those surveyed who have taken a loan from their 401(k) or similar plan, the most frequently cited reason for doing so is a financial emergency (28%). One in five people cite paying off debt, including credit card debt (21%) as the reason for borrowing.

Key Takeaways

Investing for retirement is one of the most important actions an American worker can do throughout their working years. Employer sponsored plans play a vital role. Providing ongoing education about saving and investing for retirement is key. Insights such as those provided by this survey highlight the need for continued education, resources around saving for a comfortable retirement and the issues surrounding that goal. Your local Spectrum representative is always available to help you with any retirement plan participant education needed on this topic.