While 66% of U.S. workers believe they’ll be financially comfortable in retirement, research shows that this feeling of retirement security can vary drastically across demographics.
A new report by the Transamerica Center for Retirement Studies (TCRS), “A Compendium of Demographic Influences on Retirement Security,” studies 25 key indicators of retirement readiness by general population, household income, urbanicity, race/ethnicity, gender, and LGBTQ+ status from over 10,000 respondents.
The research finds that household income strongly correlates with the amount individuals save for retirement, as just 12% of those with a household income of less than $50,000 say they will have a large nest egg in retirement. On the other hand, 20% of those with a household income of $50,000 to $99,999, 34% with $100,000 to $199,999, and 47% with over $200,000 believe they will have more than enough money to last throughout retirement.
TCRS also touches on how income levels impact access to adequate retirement savings plans, as 59% of workers with a household income of less than $50,000 are offered a workplace plan, compared to 84% of those bringing in $100,000.
Rather than allocating their savings in a plan, over half (52%) of individuals with less than a $50,000 household income say they will rely on Social Security to fund retirement, compared to only 9% of those with a household income of over $200,000.
“A person’s ability to financially prepare for retirement is greatly impacted by their household income. Lower income earners have fewer funds available to save and, moreover, they have less access to employer-sponsored benefits that can help them save, invest, and protect their savings. As a result, they often end up relying on Social Security to fund their retirement,” said Catherine Collinson, CEO, and president of Transamerica Institute and TCRS, in a statement.
Rural vs. urban savings gap
As economic activity largely concentrates itself in urban and suburban areas, TCRS makes the point that rural residents are being left behind in their retirement readiness.
According to the data, among those who have not retired, rural residents have saved only $7,000 in total household retirement accounts, compared to urban residents who have saved $50,000 and suburban residents with $67,000.
Additionally, almost half of rural residents (48%) who are not yet retired expect to retire at age 70 or older or do not plan to retire, compared with 40% of both suburban and urban residents, and 41% rely or expect to rely on Social Security, whereas just 30% of both urban and suburban residents say the same.
Race and ethnicity
TCRS research analyzed disparities across racial and ethnic populations, including Asian American and Pacific Islander (AAPI) populations, as well as white, Hispanic, and Black communities.
The report found that AAPI people had the highest household income at $99,000, followed by white ($77,000), Hispanic ($56,000) and Black people ($50,000). Among those not yet retired, AAPI people have saved $74,000 in total household retirement accounts while white people have saved $60,000, Hispanic people have saved $29,000, and Black people have saved $17,000.
Black (37%) and white people (34%) are more likely to rely or expect to rely on Social Security as their primary source of retirement income than Hispanic (28%) and AAPI people (19%). In fact, Hispanic people were likely to express concerns that Social Security would not be available when they retire (75%), compared to white (72%), AAPI (70%), and Black communities (67%).
Women continue to endure gender gap disparities
Heading into 2024, women are still facing greater risks than men in achieving a secure retirement due to a persistent gender pay gap, limited access to employer benefits, and time off in the workforce due to caregiving needs, Collinson says.
The TCRS data finds that women report a total household income of $59,000, compared to $82,000 reported by men. Among employed workers, women are less likely than men to be offered a 401(k) or similar plan by their employers (71%, 79%, respectively). And, among them, women are less likely than men to participate in it (76%, 82%, respectively), TCRS reports.
As a result, women who are not yet retired have saved $21,000 in total household retirement accounts—much less than the $73,000 saved by men. And, 38% of women currently rely or expect to rely on Social Security when they retire, compared to 26% of men.
LGBTQ+ community sees better retirement outlooks
Legal protections and a recognition of rights in the past decades has allowed the LGBTQ+ community to advance in their retirement readiness, notes TCRS.
According to the research, LGBTQ+ respondents are early in their careers, have more junior-level roles, and are just getting started on their retirement savings. Many had also experienced job-related setbacks during the COVID-19 pandemic.
Still, LGBTQ+ and non-LGBTQ+ people are similarly like to rely or expect to rely on Social Security as their primary source of retirement income (30%, 33%, respectively). Among those who are not yet retired, LGBTQ+ respondents have saved just $14,000 in total household retirement accounts, compared to $51,000 saved by non-LGBTQ+ respondents.
Additional findings from the TCRS report can be found here.
SEE ALSO:
- Less Women are Confident in Their Ability to Fully Retire
- The Very Real Fears of Retirees and Pre-Retirees: Running Out of Money
- Most U.S. Workers Unaware of Saver’s Credit
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.
