Americans’ top priority for the President and Congress to help people have a financially secure retirement is addressing Social Security’s funding shortfalls, according to a new report released today.
“American workers are stressed out about Social Security … The longer Congress waits, the more disruptive the changes could be.”
Catherine Collinson
With just one in five U.S. workers (20%) saying they are “very” confident they will be able to fully retire with a comfortable lifestyle, the report, The Multigenerational Workforce: Life, Work, and Retirement, from the nonprofit Transamerica Center for Retirement Studies (TCRS) in collaboration with Transamerica Institute, leans into public policy priorities.
Nearly six in 10 (58%) in the survey cited addressing Social Security’s funding shortfalls as their top priority, significantly beating out the next three most-cited issues: addressing Medicare’s funding shortfalls (46%), making out-of-pocket health care expenses and prescription drugs more affordable (46%), and ensuring all workers can save for retirement in the workplace (45%).
“American workers are stressed out about Social Security,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Workers are counting on Social Security for retirement income. The clock is ticking with the Social Security trust funds’ estimated depletion in the next decade. The sooner Congress takes action, the more time workers will have to adjust their financial plans, if needed, before they retire. The longer Congress waits, the more disruptive the changes could be.”
The new report found almost three in four workers (73%) are concerned that Social Security will not be there for them when they are ready to retire. Forty-three percent of Baby Boomers and 29% of Generation X expect it to be their primary source of retirement income.
When asked how Congress should address Social Security’s funding shortfall, workers are lukewarm about possible actions such as increasing the maximum earnings subject to payroll taxes (40%), increasing the Social Security payroll tax rate (38%), preserving retirement benefit payments for retirees in greatest need (34%), and raising the retirement age (23%). Just 4% say that Congress should “do nothing.”
Key indicators of retirement readiness across generations
The survey finds just one in five workers (21%) say they know “a lot” about personal finance and only 32% use a professional financial advisor. This is a challenge, Collinson said, because increasingly, today’s workers are expected to self-fund a greater portion of their retirement income compared with prior generations.
“But they are not fully equipped to take on the responsibility and associated risks. Many are on a collision course toward insufficient savings,” Collinson said.
Some good news is most workers are saving for retirement through an employer-sponsored plan and/or outside the workplace. Younger generations are getting a head start. Among those who are saving, Generation Z started at age 20, Millennials started at age 25, Generation X at age 30, and Baby Boomers at age 35 (medians).
Seventy-six percent of workers are offered a 401(k) or similar plan by their employers. Generation Z (69%) and Baby Boomers (65%) are less likely than Millennials (80%) and Generation X (78%) to be offered a such plan, which can partly be explained by their being more likely to be employed part time.
Many workers lack adequate emergency savings and, in the event of a financial setback, some are tapping into their retirement savings by taking hardship withdrawals and/or early withdrawals including Generation Z (23%), Millennials (21%), Generation X (16%), and Baby Boomers (14%).
Baby Boomers, the generation closest to retirement, have saved just $194,000 in total household retirement accounts, while Generation X has saved $93,000, Millennials have saved $50,000, and Generation Z has saved $40,000—up from $29,000 reported in last year’s survey (estimated medians).
“Now is the time for the President and Congress to restore confidence and strengthen the U.S. retirement system by addressing Social Security, Medicare, access to workplace retirement plans, financial literacy, and other drivers of retirement security,” said Collinson. “At the same time, policymakers and the retirement services industry must focus on implementing the SECURE 2.0 Act of 2022 and its provisions that make it easier for employers to offer retirement benefits and help workers save, invest, and protect their savings.”
The Multigenerational Workforce: Life, Work, and Retirement is part of TCRS’ 24th Annual Retirement Survey, one of the largest and longest-running surveys of its kind. The report examines the retirement outlook of U.S. workers aged 18 and older who are employed by for-profit companies.
SEE ALSO:
• How America Saves? At a Record Pace in 401(k), Vanguard Finds
• Americans Want $1.2M to Retire Comfortably
• Gen Xers Nearing Retirement Report Median Savings of $50k
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.