Once again, Americans of all ages are struggling with their retirement future and how they will achieve their savings goals.
Principal Retirement Group’s latest survey found that each generation put comfortable retirement among their top life goals, but around half say they are uncertain about how to plan for it, when to retire and how they will pay for it.
The disconnect is evident with 71% overall listing “living comfortably in retirement” as a top life goal along with good health and financial wellness, but only 49% have confidence that their savings will be enough. The concern breaks down similarly by generation, with Gen Z lagging in solidifying retirement goals:
- Baby Boomers: 73% vs. 52%
- Gen X: 74% vs. 45%
- Gen Y: 72% vs. 47%
- Gen Z: 54% vs. 50%
“Time and again, Americans overwhelmingly say they want a comfortable retirement, and shifts in the past few years about how we work and think about work has not changed that,” said Sri Reddy, Principal’s Senior Vice President, Retirement & Income Solutions.
You don’t know what you don’t know
Respondents’ lack of general knowledge around retirement planning was clear in several key findings:
- 50% of workers are either unsure how much they should be saving for retirement, or know they are saving less than they should be to reach their goals;
- Only 47% of workers are confident they have the knowledge to make good decisions with their retirement account ahead of a job change or retirement, down from 59% in Q1 2021;
- And while many expressed a lack of confidence in the future of Social Security, only 30% have created their retirement savings goal based on an estimated “income floor” in retirement (or what they need to cover monthly essential expenses); and
- 73% admit they lack knowledge of how to create income from savings.
In terms of how to remedy the situation, workers want help from employers with a significant number citing employer match-contributions (62%) as a key criteria to reaching their retirement goals. They also say having a balanced investment portfolio (52%) and financial advice and guidance (51%) are important factors.
Employers aim to step up
In a white-hot labor market, many employers are actively bolstering retirement-related benefits to attract talent. Another contributing reason is employers’ lack of confidence in how their employees are saving: just 39% of plan sponsors feel their employees are doing a good job preparing for retirement and only 15% feel their employees will have enough money saved. Employers clearly recognize that a retirement plan is important for maintaining their workforce, with about half citing retention and attraction as a top reason to offer a plan and 61% feeling it’s important for employees to participate.
A significant 68% of plan sponsors feel responsible for making a retirement plan available to employees. But 32% say they don’t do enough to encourage employees to increase their deferral savings percentage, and 33% feel they don’t do enough to encourage employees to start planning for income in retirement—two key areas for improvement.
Overall, Principal’s Reddy says there is a lot of work to be done to help people feel more secure and confident in their planning.
“It’s our job to demonstrate how the right tools, resources, and education can help people remain calm through bouts of market volatility while still preparing for the future.”
SEE ALSO:
- Inflation Causing Many Older Workers to Postpone Retirement
- Workers Reevaluate What They Want From Employers
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
