Americans are not in the position to retire anytime soon, finds a new Q2 report by Schroders.
The “DC Lens Q2 2024” report, a flagship series of quarterly market insights and news updates, underlines some bleak updates to the state of participants’ retirement readiness. According to the analysis, 28% of people have zero savings for their retirement, 39% are not contributing to a retirement fund, and 30% don’t see a future where they can retire.
Schroders points to underutilization of retirement accounts for the lack of savings, noting that a Bureau of Labor Statistic (BLS) report found that while 69% of private industry workers have access to an employer-sponsored retirement plan, only 52% participate for a take-up rate of 75%.
Still, workers continue to look to their employer for enhanced savings benefits, and the government for added support. A survey of Millennials by IRALOGIX found that 25% say their employer is responsible for ensuring sufficient savings, and 20% believe the government should provide retirement savings. Schroder’s analysis argues that all three groups—workers, employers, and the government—can work together to maximize retirement readiness.
What employees can do
According to Schroders, when preparing for retirement, savers should work on budgeting to ensure they are not overspending and can dedicate sufficient funds for retirement. Yet, studies show that participants continue to struggle with budgeting, as rising day-to-day costs, inflation and market rates impede on their savings abilities.
Other tactics include starting their retirement savings one eligible; maximizing the employer match; increasing contributions when they receive a raise, bonus, or obtain extra money; choosing appropriate investments aligned with their retirement goals and risk tolerances; utilizing catch-up contributions for those ages 50 or older; considering Roth options; and seeking professional advice.
What employers can do
Plan sponsors can maximize plan effectiveness by incorporating more retirement-focused features outside of the workplace retirement plan. For example, provisions brought on by SECURE 2.0 allow employers to now add emergency savings features linked to the 401(k) plan, along with matching student loan payments in accordance with retirement plan contributions.
Employers should also review their plans’ investment lineup to ensure an appropriate, diverse bundle of investment options, Schroders adds. This includes incorporating both passive and active funds.
What the government can do
Schroders’ analysis touches on the role Social Security plays in securing retirement income for participants, noting that the longer participants wait to receive payments, the more they’ll receive throughout retirement.
Those who delay Social Security benefits past their full retirement age (FRA) could even take advantage of an 8% increase per year of delay. Schroders’ notes this option could work best for retirees who believe will live long enough to benefit from the delay.
Still, Schroders adds that some participants could benefit from taking Social Security early, such as those needing income due to retirement, overcoming health issues, unemployment, or if they believe their life expectancy would not justify waiting for a higher monthly amount.
Additional findings from Schroders’ report can be found here.
SEE ALSO:
- A Third of Younger Workers Have Zero Retirement Savings
- Retirement Confidence Has Remained ‘Below Average’ Since 2022
- The Impact of Inflation’s Return on Retirement Planning
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
