If you want retirement and 401k plan statistics, Transamerica’s got ‘em, and they point to a number of red flags in the way participants are accumulating assets. Like, baby boomer workers have just $147,000 saved in all household retirement accounts. That’s up from $99,000 in 2012, but at a 4 percent withdrawal rate, it’s less than $6,000 of sustainable income each year.
Transamerica’s Center for Retirement Studies released “A Compendium of Findings About American Workers,” a multi-year study which also found that only 39 percent of workers said that they had either fully financially recovered or were not impacted by the Great Recession,which was slightly higher than in 2015 and represents a solid improvement over 2014.
Further, 77 percent of workers were concerned that Social Security won’t be there for them when they are ready to retire.
When asked about priorities for the next President and Congress to help Americans prepare for a financially secure retirement, workers most frequently cited “fully funding Social Security by implementing reforms to ensure that it can pay guaranteed benefits for future generations of retirees.”
Key findings include:
- Few workers are “very” confident about retirement. Many workers (62 percent) are confident that they will be able to fully retire with a comfortable lifestyle, but only 15 percent are “very” confident and 47 percent are “somewhat” confident. Retirement confidence has plateaued since 2014 (64 percent), but remains well above 2012 (51 percent).
- Retirement and 401 plan fears range from finances to health. Workers’ top three most frequently cited retirement fears are “outliving my savings/investments” (51 percent), followed by “Social Security will be reduced or cease to exist in the future” (47 percent), and “declining health that requires long-term care” (45 percent). While these top three fears remain unchanged since 2015, the percentage of workers citing them as fears has increased (from 44 percent, 36 percent, and 36 percent respectively).
- Total household retirement savings are unlikely to last very long in retirement. As noted earlier, the generation that is currently entering into retirement, Baby Boomer workers, have just $147,000 (estimated median) saved in all household retirement accounts, up from $99,000 in 2012. Twenty-two percent of Baby Boomer workers have less than $50,000 saved.
- Many workers plan to work past age 65 or do not plan to retire. The majority of workers (54 percent) plan to work past age 65 (41 percent) or do not plan to retire (13 percent), a finding which is lower than in 2015 (58 percent), but otherwise consistent since 2012 (56 percent).
Influences of Demographics on Retirement Preparedness
The Compendium also offers 30 key indicators of retirement readiness among workers by employer size, generation, gender, household income, level of education, and ethnicity.
These include:
- Workers of large companies have more access to employer-sponsored retirement benefits. Most workers (71 percent) are offered a 401k plan or other self-funded plan by their employers; however, access is greater among workers of large companies with 500+ employees (80 percent) compared to those of small companies with 10-499 employees (60 percent). Few workers are offered a company-funded 401k plan (26 percent).
- Baby Boomers, Generation X, and Millennials face different retirement realities. Millennials (43 percent) and Generation X (38 percent) most frequently expect a 401k plan, 403(b)s and/or IRAs to be their primary source of retirement income, while Baby Boomers (34 percent) most frequently cite Social Security. Some workers expect “working” to be their primary source of income in retirement, including 16 percent of Millennials, 17 percent of Generation X and 11 percent of Baby Boomers.
- Women are at a greater risk than men of not achieving a financially secure retirement. Men report having an estimated median total household retirement savings of $115,000 compared to just $34,000 among women. Men (33 percent) are twice as likely as women (16 percent) to say that they have saved $250,000 or more in total household retirement accounts.
- Lower income workers are less likely to be saving for retirement. Just 60 percent of workers with household incomes of less than $50,000 are saving for retirement, compared to 79 percent of workers with household incomes of $50,000 to $99,999, and 89 percent of workers with household incomes of $100,000 or more.
- Workers with higher levels of educational attainment are more confident about retirement. College graduates (21 percent) and those with some graduate school or advanced degree (24 percent) are more likely to be “very” confident about their future retirement compared to those with only some college or trade school education (13 percent) or those with a high school diploma or less (9 percent).
- Retirement savings rates vary by ethnicity. Asian workers (86 percent) are most likely to be saving for retirement through an employer-sponsored retirement plan and/or outside of work, followed by White (78 percent), African American (73 percent), and Hispanic workers (70 percent). Asian workers also have the highest reported household retirement savings at $134,000 (estimated median), compared to White workers ($89,000), Hispanic workers ($48,000) and African American workers ($22,000).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
