Almost seven in 10 workers (69%) believe they could work until retirement and still not save enough to meet their needs, while nearly eight in 10 (79%) feel that people in their generation will have a much harder time achieving financial security compared with their parents’ generation.
These are among some sobering findings released this week from a new survey, Retirement in the USA: The Outlook of the Workforce, released this week by nonprofit Transamerica Center for Retirement Studies (TCRS) in collaboration with Transamerica Institute.
“Today’s workers are stuck between a rock and a hard place. They are traversing disruptions in the economy, a tenuous employment market, and the high cost of everyday living—while being expected to self-fund a greater portion of their retirement income compared with prior generations. Many are struggling to save adequately,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
According to the survey’s findings, 72% are concerned that Social Security will not be there for them when they are ready to retire. At the same time, 72% have taken measures to address financial strain from rising inflation, and 56% are still financially recovering from the COVID-19 pandemic and its aftermath. Forty-three percent are worried that artificial intelligence (AI) and robotics will make their job skills no longer needed.
As part of TCRS’ 25th Annual Retirement Survey, one of the largest and longest-running surveys of its kind, the report examines the retirement prospects of the workforce including their personal finances, retirement expectations, and how they are saving, planning, and preparing for the future. It offers comparisons of workers who are employed by others, self-employed, and unemployed but looking for work. The report is a call to action with recommendations for policymakers, employers, and workers.
Why workers at risk of falling short
“Employed workers are generally better positioned to prepare for retirement. They enjoy a steady income, and many are offered employer-sponsored retirement plans that make it easier to save and invest,” said Collinson. “At the same time, employed workers are financially stretched with competing priorities and they are vulnerable to job loss and other financial shocks. These factors put them at risk of falling short.”
More than half of employed workers (52%) expect their primary source of retirement income to come from self-funded savings, including 401(k)s, 403(b)s, and IRAs (41%), and other savings and investments (11%). Yet only 28% of employed workers “strongly agree” they are building a large enough retirement nest egg.
More than eight in 10 employed workers (83%) are saving in an employer-sponsored retirement plan and/or outside the workplace, and they began saving at age 26 (median). But an alarming 37% have tapped into their retirement accounts, including 31% who have taken a loan and 21% who have taken an early and/or hardship withdrawal. Employed workers have saved $82,000 (estimated median) in all household retirement accounts.
Employed workers envision extending their working years and fully retiring at an older age, a solution that provides income and more time to save. Thirty-six percent of employed workers expect to retire at age 70-plus or do not plan to retire—and 53% plan to continue working in retirement. Unfortunately, many are not taking adequate steps to be able to do so. For example, just 58% are focused on staying healthy so they can continue working and only 48% indicate they are keeping their job skills up to date.
Self-employed workers redefining retirement
“For the self-employed, saving and planning for retirement requires a proactive, do-it-yourself approach.”
Catherine Collinson
“Self-employment brings freedom, flexibility, and the opportunity to be your own boss—but it often comes without steady income or employer-sponsored retirement benefits. For the self-employed, saving and planning for retirement requires a proactive, do-it-yourself approach,” said Collinson.
Self-employed workers envision long and economically productive lives. One in five (20%) plan to live to age 100-plus. Fifty-five percent expect to retire at age 70-plus or do not plan to retire—and 56% plan to work at least part time in retirement. Thirty-seven percent dream of doing paid work in retirement.
One in three self-employed workers (33%) expect their primary source of retirement income to come from self-funded savings, while 20% expect it from Social Security, 17% from their business (if they own one), and 15% from continued work.
Six in 10 self-employed workers (60%) are saving for retirement, and they started saving at age 29 (median). Among them, 75% are saving in tax-advantaged retirement savings accounts. The self-employed have saved $87,000 (estimated median) in all household retirement accounts.
“Retirement may be less relevant to self-employed workers—especially if they enjoy their work,” said Collinson. “While it may be tempting for them to procrastinate or forego retirement planning altogether, planning to not retire is not a retirement strategy. Life’s unforeseen circumstances can easily derail their aspirations.”
Just 22% of self-employed workers have a written financial strategy for retirement.
A call to action
“As workers are navigating transformations in the economy and workforce, policymakers can pave the way for strengthening the retirement system by ensuring the sustainability of safety nets such as Social Security and Medicare, facilitating the expansion of workplace retirement savings programs, promoting financial literacy, and fostering innovation to make living into old age more affordable,” said Collinson.
“Employers also play a vital role by offering job opportunities, professional development and on-the-job experience, and valuable employee benefits,” she added. “A collective and collaborative effort across the public and private sectors is critical for future-proofing retirement so that all Americans can retire with dignity.”
Retirement in the USA: The Outlook of the Workforce is a follow-up to TCRS’ report Emerging from the COVID-19 Pandemic: The Retirement Outlook of the Workforce (2022). To download these reports visit www.transamericainstitute.org.
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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.
