A new report finds that 62% of U.S. retirees left the workforce sooner than expected, shortening their savings period, and extending their retirement years.
“With life expectancy close to 80, Americans must now plan for how they’ll live and fund multiple decades of retirement.”
Aimee DeCamillo
John Hancock Retirement, a company of Manulife Investment Management, today released the John Hancock Financial Resilience and Longevity Report, incorporating data from its 10th annual survey of its U.S. retirement plan participants and a separate panel of U.S. retirees.
The report shows retiree experiences differ quite significantly depending on how/when respondents retired—as planned or earlier than expected.
Against a backdrop of longer life expectancy, and potentially more years to fund in retirement, the report explores what can be done to help improve financial resilience when working, possibly enabling people to save more for retirement.
“All over the world, people are living longer. While we used to count retirement in years, now, many of us can look forward to counting it in decades,” said Aimee DeCamillo, Global Head of Retirement, Manulife Investment Management. “With life expectancy close to 80, Americans must now plan for how they’ll live and fund multiple decades of retirement. This year’s report brings additional clarity to help participants save, stay invested, and transition into retirement.”
The report suggests that the age at which a worker plans to retire (their target retirement age) depends partly on the financial resilience they’re able to achieve during their working years. It refers to financial resilience as the ability to navigate financial obstacles such as debt, college costs, healthcare expenses, and emergencies. Workers struggling to meet their current financial needs often struggle to build this resilience and tend to delay saving for retirement.
In addition to this latest report, earlier this year, as part of its focus on increasing longevity, John Hancock and Manulife announced a 5-year, multimillion-dollar collaboration with MIT AgeLab with the goals of raising public awareness and driving innovation in how people prepare for longer lives. Insights from this work will be used by the business to help financial professionals and plan sponsors do all they can to help individuals prepare for a comfortable retirement.
“I applaud John Hancock Retirement for bringing the longevity lens to its work in helping people prepare for retirement,” said Dr. Joseph Coughlin, founder and director, MIT AgeLab. “Together we are working to educate and motivate people to do what it takes for themselves, their families, and their communities—to turn a longer life into a better life for all, and funding a secure retirement is a critical component.”
Additional findings from the report are below.
Personal finances remain strained
Despite improvements in the economy since the last survey, workers are still nearly twice as likely to describe their finances as fair or poor (41%) as they are to call them very good or excellent (22%). About half consider their level of debt to be a problem, and only slightly fewer (45%) are concerned about their emergency savings.
The situation is most concerning among Gen Z/Millennials, with more than half (53%) reporting a poor/fair financial situation. Although Baby Boomers are least likely to describe their financial situation as poor/fair, a third (32%) do feel this way.
Retirement prep is behind
Half of workers report being behind in their retirement saving and only 1 in 3 feel they are on track. Less than one third have completed a formal and comprehensive retirement plan and the same number have a financial advisor. Despite being most likely to feel their retirement savings are on track, 2 in 5 Baby Boomers say they’re behind.
On average, workers expect to retire 4 years later than they’d like to, most commonly so they can continue to work to increase retirement savings or pay off debt. However, because our retiree data shows almost two thirds of retirees stopped working earlier than expected, it may not be realistic for workers to count on having the extra time to save.
While 3 in 5 U.S. workers make saving for retirement a priority, 2 in 5 say they would be saving more if they could better manage their finances. Gen Z/Millennials and Gen X are more likely than Baby Boomers to say managing their financial priorities is getting in the way of saving for retirement.
Close to half of U.S. workers are worried about being able to afford basic expenses or healthcare in retirement. Generationally, Gen Z/Millennials’ concern about affording the basics in retirement has increased since 2022. Along with Gen X, they’re also more likely than Baby Boomers to worry about this a great deal.
Engaged participants in better financial shape
As in past years, survey results, in combination with John Hancock Retirement’s participant data, found that workers who engage with their retirement plans digitally—by logging in to the plan website or opening email communications from their plan—are more likely to report that they’re in good financial shape and on track for retirement than their less engaged peers.
More than 6 in 10 employees opening 6 or more emails from their financial wellness provider in a year reported being in a good financial situation, compared to 53% who only opened 1 or 2. Similarly, those who’d logged in to the financial wellness website within the year vs. not since last year (2023) or earlier also reported having a good financial situation, 62% vs. 50%.
“With more than 56,000 plans of varying sizes, we offer plan design and features to help improve savings, encourage the adoption of tools that use data and modeling to help show individualized scenarios, and harness technology to engage with participants in a personalized manner so as to be most effective in helping them succeed,” said Wayne Park, CEO, John Hancock Retirement. “We want to make sure each participant has what they need and feels comfortable investing and saving for their financial lives in partnership with sponsors, advisors and third-party administrators to help achieve the best outcome possible.”
Challenges of retiring early
American workers who retired as planned or later have a significantly more positive outlook on their financial situation and resilience than those who retired early. Their preparedness may be a key driver of this optimism. The majority had a formal plan in place before retiring, and more than half work with a financial professional.
Alternatively, 62% of retirees left the workforce sooner than expected and are facing more financial challenges compared to retirees who were able to retire as planned or later. Almost three quarters (72%) of early retirees wish they had saved more before retiring, compared with 47% of their counterparts. As the cost of living rises, these retirees are more likely to need a change in lifestyle and spending habits to manage the gap in their retirement income.
“Responses from retirees indicate there is a lot about retirement that truly is a dream. As you might be imagining for your own retirement, they are relaxing, enjoying hobbies, and connecting with family and friends with the time they are no longer needing to dedicate to full time work,” Park added. “Our goal is to help people make the most of their retirement plans to diligently save and invest, to help them feel secure—no matter the number of years that are spent in retirement.”
SEE ALSO:
• John Hancock Working with MIT AgeLab on Longevity Innovation, Research
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.
