Just over half of non-retired Americans describe being “concerned” or “very concerned” over outliving their assets in retirement, yet many continue to sacrifice their Social Security income, finds new research out today by Schroders.
Schroders’ 2024 U.S. Retirement Survey finds that 51% are at the very least fretful over outlasting their assets, but 43% are planning to begin withdrawing from Social Security before age 67—the general full retirement age (FRA) for those both in 1960 and later. Just one in 10 plan to wait until at least age 70, at which they would then receive the maximum benefit.
“There is no one-size-fits-all answer for when to file for Social Security, however, delaying benefits for as long as possible can add several hundred dollars to those monthly checks,” said Deb Boyden, Head of US Defined Contribution, Schroders. “With so many Americans behind on retirement savings, waiting to collect Social Security benefits can have a significant impact on your quality of life during your decumulation years.”
When asked why they started withdrawing Social Security benefits before age 70, 39% of non-retirees said they needed the money, 38% reported concerns that Social Security would run out of money or stop making payments, 36% wanted access to the money as soon as possible, and 12% said they were advised to begin collecting benefits before age 70.
Furthermore, 57% of Americans describe the idea of irregular paychecks as “concerning,” while 22% describe it as “terrifying.” An overwhelming majority (88%) of non-retirees said they were at least slightly concerned over not knowing how to best generate retirement income.
Market turmoil
The fear of missing out on or losing money severely underlines the financial security many continue to face, especially in an environment turmoiled with harsher, higher day-to-day costs compared to years prior. According to Statista, the Consumer Price Index for All Urban Consumers (CPI-U) grew 20.9% since February 2020, right before the pandemic interrupted the global economy.
Had the pandemic not occurred, Statista predicts that inflation rates would have only increased by 9.1%, signaling its gravity on the global market and its influence on the inflation surge.
Retirement income insecurities
As a result, when asked how much monthly income would be required to live comfortably, non-retirees say they would need $4,947 on average—higher than the $4,258 of monthly income that today’s retirees are making, reports Schroders.
In addition to Social Security, non-retirees plan to draw upon several financial resources for their retirement, including cash savings (60%), their 401(k), 403(b), or 457 plan (48%), spouse’s workplace retirement plan (37%), investment income (36%), or their spouse’s pension plan (27%).
Those who have formal strategies to generate income say they use dividend-producing stocks or mutual funds (23%), systematic withdrawals from retirement accounts (22%), or Certificates of Deposits (CDs) (17%) to produce income.
Still, despite having resources and strategies in place, some are still doubtful they’ll be able to achieve enough income in retirement. When asked if they would be able to replace at least 75% of their last paycheck in retirement income, 37% had their doubts while 12% were doubtful. Forty-one percent said they would probably be able to generate the income, while 10% are certain they can.
Interest in guaranteed products
According to Schroders, among Americans participating in a workplace retirement plan, 50% said their primary investment objective was to generate steady income, 41% said it was to grow assets, and 9% said to protect assets. Almost all (94%) expressed interest in a retirement investment product from their employer that “actively manages the risk of loss while seeking to grow assets at a rate equal to the current cash rate plus 5%.”
Over one-third (38%) of plan participants said their plan provided a retirement income solution, while 36% said they didn’t know and 26% said no. Nine in 10 (90%) of those who are offered an income solution in their plan stated they would be likely to use it.
Among those who don’t know or do not have a retirement income solution in their plan, 62% wish their plan did, 29% were unsure, and 9% said it wasn’t necessary.
“The transition from retirement savings accumulation to the decumulation phase is not an easy one to make,” added Boyden. “With working Americans increasingly looking to their employers for answers, plan sponsors and assets managers have an opportunity to work together to develop solutions that create a stronger bridge between the asset accumulation and decumulation phases to grow and preserve plan participant wealth while simultaneously providing an opportunity to optimize the timing of their Social Security benefits.”
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.