Many American workers are still recovering from the Great Recession, but most are focused on saving for retirement and have varying degrees of confidence they will be able to retire comfortably, according to a comprehensive study on worker perspectives.
The Transamerica Center for Retirement Studies (TCRS) study, “A Compendium of Findings About American Workers,” shows that 56% of workers say they have not yet fully recovered financially from the Great Recession, with 37% saying they have “somewhat” recovered, 12% saying they have not yet begun to recover and 7% saying they may never recover from it. In contrast, 44% of workers say they have either fully recovered (24%) or were not impacted (20%).
The Compendium, which is part of TCRS’ 18th Annual Transamerica Retirement Survey, provides a five-year trend analysis and in-depth perspectives on more than 60 key indicators of retirement readiness, including access to employer-sponsored retirement benefits, savings rates, planning-related activities and retirement confidence.
Last year, retirement confidence inched slightly higher compared to five years ago, the study found. In 2017, 62% of workers were confident that they will be able to fully retire with a comfortable lifestyle, including 18% who are “very confident” and 44% who are “somewhat confident.” The study notes that this is an improvement over 2013 and 2015, but consistent with 2016.
Future of Social Security
Not surprisingly, there are ongoing concerns about the viability about Social Security. The study finds that 76% of workers in 2017 expressed concern that the program will not be there for them when they are ready to retire — a finding that essentially has not changed since 2014.
“Most workers are counting on Social Security as a meaningful source of income in retirement – and most are concerned about its future,” explains Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Reform is needed to mitigate Social Security’s funding shortfalls, but policymakers have made little progress in identifying and implementing specific changes. Workers need clarity and direction so they can plan accordingly.”
The study suggests that these concerns present an opportunity for education, with 68% of workers admitting that they do not know as much as they should about retirement investing, and two-thirds looking to their company for more information and advice on how to reach their goals.
Meanwhile, even though workers have seen gains in their retirement accounts over the past five years, only 20% of workers “strongly” agree that they are building a large enough retirement nest egg. On the bright side, this number is an improvement from the 11% who said the same in 2013.
Coverage and Participation
Retirement plan coverage has increased slightly among respondents. According to the report, 71% of workers are offered a 401(k) or similar plan by their employers, which is slightly higher than in 2013 (68%).
Other key findings show that retirement plan participation and contribution rates have increased. Among workers who are offered a 401(k) or similar plan, 81% participate, up slightly from 78% in 2013. Moreover, the findings show that the median contribution rate of workers participating in a plan is 10% of their annual salary, up from 7% in 2013.
The report further observes that although savings have increased, the level does not appear to be enough to last 20 or more years in retirement. The estimated median of American workers’ total household retirement savings was to $71,000 in 2017, up from $53,000 in 2013. For Baby Boomer workers, the estimated median was $164,000 in all household retirement accounts, up from $103,000 in 2013.
When asked what they expect to be their primary source of retirement income, many workers said they plan to self-fund their retirement through 401(k)s, IRAs or similar accounts (38%), or other savings and investments (12%). Social Security was cited by 26% of workers who plan to rely on the program as their primary source of income in retirement. The survey also found that 14% expect that income from working will be their primary source of income to cover living expenses when they retire.
To that end, workers’ expectations regarding when and how they will retire represent a “dramatic change” from a long-held notion of retiring at age 65, the report notes. The majority of workers (56%) plans to continue working in retirement, including 14% who plan to work full-time and 42% who plan to work part-time. The proportion of workers who plan to work in retirement has risen slightly over the last four years — it was 54% in 2013.
Among respondents who plan to work in retirement or past age 65, larger proportions indicated they plan to do so because of financial reasons (83%) than “healthy-aging” reasons (75%). The top financial reason for doing so is because workers want the income (57%), while the top healthy-aging reason is to be active (54%), the report notes.
The analysis contained in the report was prepared internally by the research team at TCRS. An online survey was conducted by The Harris Poll between Aug. 9 and Oct. 28, 2017, among a nationally representative sample of 6,372 workers.