Americans have bleak prospects for their retirement.
A Gallup poll released this week found workers’ expectations for a comfortable retirement are the most pessimistic they’ve been in more than a decade. Nearly 6 in 10 (57%) who are not yet retired expect a shortfall.
This is a significant increase from the 52% that was dark last year, 47% in 2021 and 43% before the pandemic. On the other hand, 77% of retirees say they have enough money to live comfortably, which is consistent with sentiment over the past year.
The divergence in outlook between American workers and retirees also extends to expectations about when people will retire, whether they will work, and the main sources of retirement income, the latter of which workers are increasing to compensate for their gloomy prospects.
“Expectations for a financially comfortable retirement are at their worst in more than a decade among non-retirees in the United States,” Megan Brenan, managing editor at Gallup, told Yahoo Finance. “Over the past two years, high inflation and recessionary anxiety have meant less than half of non-retirees are optimistic about their retirement.”
Today, more than 42% of working Americans are very worried about being able to finance their retirement and more than 7 in 10 who are “at least moderately worried about being able to finance their retirement”, according to the new survey.
The results of this year’s poll are based on telephone interviews conducted from April 3 to 25 with 1,013 adults, as part of its annual Economics and Personal Finances Survey.
Gallup’s findings align with a recent survey by the Employee Benefits Research Institute (EBRI) and Greenwald Research that reported that the certainty Americans feel about whether they will have enough money for a comfortable retirement has taken the biggest plunge in 15 years.
“The most important finding is the drop in retirement confidence that hasn’t happened since 2007 to 2008 and 2008 to 2009, when the economy was in a recession,” Craig Copeland, research director, previously said. on Wealth Benefits at EBRI, at Yahoo Finance.
“Americans are reacting the same way they did during a recession,” he added. “The current economy isn’t the best, but it’s definitely not in a recession.”
According to Gallup research, Americans’ bleak prospects for retirement also differ starkly by demographics.
“The majority of certain demographic groups — including those with higher incomes, college graduates and young adults under 30 — have a positive outlook for retirement,” Brennan said.
Half of men surveyed versus around a third (36%) of women said they thought they had enough money to retire comfortably. And for Americans between the ages of 18 and 29, more than half were confident they would be fine, but less than 4 in 10 (39%) of near-retirement workers — between the ages of 59 and 64 — said they thought they would be financially secure.
Americans with higher incomes and college graduates were also reasonably optimistic about their chances of weathering a lack of savings. More than half of college graduates believe they will have enough money to live comfortably, as do nearly two-thirds of those polled with the highest incomes.
Workers’ expectations of other aspects of retirement are also strikingly different from the experience of current retirees.
For example, the gap between when people expect to retire and when they do is significant. The average age at which non-retirees expect to retire is 66, while the actual average age at which retirees report having retired is 62.
One in four workers (39%) expect to retire after age 65, according to Gallup data. Just under 1 in 3 (32%) say they will retire before age 65.
Workers also mistakenly expect to be paid for their work in retirement While 20% of workers plan to earn a salary during their retirement years, a small fraction (3%) of retirees do so, according to Gallup data. .
There are many reasons for this dashed desire, from health issues that prevent people from staying on the job, to caregiving duties, to the ageist attitudes of employers, making it more difficult to hire.
Finally, workers have different ideas about where their retirement income comes from.
Only 34% of workers expect Social Security to be a major source of retirement income, compared to 59% of retirees who say so. This disparity could reflect concerns about the future of social security.
A recent annual report showed that Social Security reserves are expected to run out in 2033, when the program will only be able to pay 77% of benefits to seniors. The implications for many workers who plan to rely on Social Security for much of their retirement income would be severe.
Meanwhile, 48% of those who are still working expect to rely on retirement savings accounts such as a 401(k) or IRA in their golden years, compared to 27% of retirees who found it to be true.
Maybe that’s why it looks like American workers are increasing their savings rate.
This week, Loyalty released its analysis of 2023 retirement trends and found that 401(k) total savings rates were on the rise.
The total savings rate for the first quarter, which reflects a combination of employer and employee 401(k) contributions, improved to 14% (compared to 13.7% in the fourth quarter of the year). last year, returning to the economies seen at the start of market volatility in early 2022.
Boomers still in the workforce are accumulating savings at the highest levels of any age cohort (16.7% vs. 16.5% last quarter) and Gen Z savings levels have increased. also increased (10.5% against 10.2% in the last quarter). The average 401(k) balance for baby boomers is now $215,000; $145,000 for Gen X; and $44,900 for millennials, according to Fidelity’s breakdown.
“The data this quarter shows baby boomers are saving at a very healthy pace,” Michael Shamrell, vice president of workplace thought leadership for Fidelity, told Yahoo Finance. “In addition, baby boomers are taking advantage of IRS “catch-up” contributions, which allows them to save additional money in their 401(k) beyond the normal limit, which can help them get closer to their retirement savings goals.”
One of the reasons for the increase in savings rates is a feature offered by many employer-sponsored pension plans that allows savers to automatically increase their contributions each year.
Auto-escalation is designed to periodically increase your contribution rate to your 401(k) plan. For example, if you set the automatic indexation rate at 1% per year, each year your contribution rate will increase by 1%.
“The rise in account contributions is due to the growing number of participants taking advantage of the auto-increase feature of their 401(k) plan,” Shamrell said. “In the first quarter of 2023, 70% of employer plans offered an automatic increase feature and 17.4% of workers increased their contribution rate – of this percentage, around two-thirds was due to the automatic increase – the other third was ‘proactive’ by the employee.”
Kerry Hannon is a senior reporter and columnist at Yahoo Finance. She’s a workplace futurist, career and retirement strategist, and author of 14 books, including “In Control at 50+: How to Succeed in The New Work of Work” and “Never Too Old To Get Rich.” Follow her on Twitter @kerryhannon.
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