The good news is that Americans realize the must save longer for retirement. The bad news is that even with the extended saving period, they’ll stay just about even.
A recent survey from HSBC finds that Americans preparing for retirement expect to save seven years longer than current American retirees did. However, Americans are similarly as under-prepared for retirement as their global pre-retiree peers, who also cite a seven year gap.
HSBC’s recent Future of Retirement – Generations and Journeys report seeks “to understand how individuals can better prepare for their financial security at all stages of life.”
“Americans did stand apart from the world in one important area: the number of years in the workforce,” Michael Schweitzer, Global Head of Sales and Distribution, said in a statement. “Americans work an average of 5 years longer compared to their global counterparts – 35 years versus 30, respectively.”
44 percent of American pre-retirees wish they started saving earlier
Despite beginning to save for retirement earlier and working more years than their global counterparts, many working age Americans still don’t think they are saving enough. Almost half (44 percent) wish they had started to save earlier, and 33 percent say they should have saved more by putting aside a larger share of income.
HSBC’s report also uncovers that almost one in seven (14 percent) of working age people have still not started saving for their retirement, including 3 percent of those aged 60 or over.
“With individuals living longer and an unpredictable financial landscape possible in the years to come, it’s crucial that Americans prioritize planning for retirement today in order to be adequately prepared for the future,” Schweitzer added. “Through the power of compounding, people who start planning early can save more than they imagined and help put themselves on a secure footing for retirement.”
American retirees rely less on family and more on investments or savings
According to HSBC’s research, American retirees rely less on their children for support (3 percent) compared to the global average (12 percent). Hong Kong and Singapore, in contrast, reported receiving much higher proportions of financial support from children at 41 percent and 34 percent, respectively.
Instead, over half of retirees in the US are using cash savings to fund retirement (56 percent), the third highest amount globally. Other forms of funding include social security (51 percent), stocks (38 percent), mutual funds (32 percent) and a spouse or partner’s income (29 percent).
Americans are also more inclined than retirees in other countries to depend on income earned from selling property, ranking the third highest at 10 percent.
American men save earlier and more than women
Women in the US are less likely than men to have started saving for retirement. HSBC’s research reports 17% of women have not started saving for retirement at all, compared to 10 percent of men. On average, men began saving at the age of 29 while women waited until age 34.
Additional key findings
- 22 percent of pre-retirees have never received advice or information about retirement
- 42 percent of people older than 60 expect to move into a retirement home
- 55 percent of people in their 40s are financially supporting others
- 59 percent say financial security is one of the things they value most in life
Practical steps
HSBC’s research identified four actions that people can take to help improve their financial well-being in retirement:
- Consider all your retirement expenses:40 percent of retirees cited credit card repayments as a retirement expenditure, however, only 20 percent of pre-retirees expect to be repaying credit cards when they retire. When planning for retirement, make sure to list all your possible retirement expenditures.
- Start saving earlier for retirement:Plan to start saving for retirement earlier, to help build a bigger fund and allow it to grow for longer.
- Seek advice from a professional: 11 percent of retirees have received financial advice from only friends or family. Seek information from many sources, but make sure the advice you get is professional.
- Expect the unexpected:35 percent of pre-retirees who are saving for retirement have either halted or struggled to save at some point. No one can predict the future, but preparing for unforeseen events can soften the impact of unforeseen life events if they do occur.