Non-retirees say they’ll need close to $5,000 a month to enjoy a comfortable retirement.
A new U.S. Retirement study from Schroders surveyed Americans on their expected monthly income throughout their golden years, finding that the average said $4,940 is a must during retirement. Non-retired Millennials averaged at $5,135 per month, while those nearing retirement (ages 60 to 65) said $4,855 monthly.
The actual monthly figures of today’s retiree falls just about $1,000 short, Schroders finds in its research. Currently, retirees say that with Social Security, their total monthly income is $4,170 on average, and 37% reported a monthly income of less than $2,500.
Those numbers change for those working with a financial professional—the average monthly income including Social Security for those with an advisor came out to $5,075 and at $5,810 for retirees with a formal financial plan. Comparatively, those without a financial plan averaged at $3,000 per month.
The Schroder’s survey analyzes retirement income for the American workforce, surveying respondents on their expected monthly income, Social Security, and workplace income solutions.
Among workers who participate in a workplace retirement plan, Schroders found 32% said their plan provided a retirement income solution, 39% didn’t know, and 29% said it did not. Among those who said they weren’t sure or replied no, 55% said they wish their employer offered a retirement income solution, including 64% of those closing in on retirement.
Thirty-three percent said they weren’t sure whether they would want a retirement income solution, and 12% said it wasn’t necessary.
“Americans are increasingly looking to their employers for insights and solutions to their retirement income challenges,” said Deb Boyden, head of U.S. Defined Contribution at Schroders, in a statement. “While this has been a topic of conversation for some time, we believe we are entering a phase of accelerated adoption among plan sponsors for solutions to meet these challenges, with products that provide lifetime income, while addressing sequence of return risk with principal protection, and giving investors the flexibility to take the income when they want or need it.”
Instead, non-retired workers expect to use cash savings (58%); workplace retirement plans (53%); investment income outside of employer provided retirement plan (40%); defined benefit/pension plan (20%); rental income (14%); annuities (10%); cash value of life insurance (10%); and reverse mortgage (4%) to supplement retirement income.
The survey comes at a time when more Americans report trepidations over future retirement income, Schroders finds. Fifty-seven percent of respondents said the idea of not having a regular paycheck in retirement is concerning, while 23% report it as “terrifying.”
Americans also have low final paycheck income replacement expectations, reported Schroders. According to the data, 23% believe they will need to replace 75% or more of their final paycheck with other sources of income in retirement, 32% said between 50-74%; 23% said they needed to replace less than 50%; and 22% had no idea.
Currently, for retirees, 51% can replace less than 50% of their last paycheck; 26% are able to replace 50% to 74%; and 24% can replace 75% or more. Among the strategies they use for retirement income include systematic withdrawals from retirement accounts (33%); dividend producing stocks or mutual funds (24%); annuities (13%); individual bonds or bond mutual funds (12%); and CDs (12%).
SEE ALSO:
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.
