While most U.S. workers say they are saving for retirement through employer-sponsored plans or other means, a much smaller percentage say they are “very confident” they will be able to retire fully and comfortably.
According to the 320-page Compendium of Findings About the Retirement Outlook of U.S. Workers from the Transamerica Center for Retirement Studies (TCRS) in collaboration with Transamerica Institute, more than four out of five workers (82%) say they are saving for retirement through their current employer’s 401(k) or similar plan and/or outside of work.
Glass Half Full or Half Empty?
But while most surveyed workers report that they are saving for retirement, fewer than one in four (24%) are very confident that they will be able to fully retire with a comfortable lifestyle. Still, despite the pessimistic figure, the survey also finds that 49% of workers say they are “somewhat confident,” resulting in nearly three in four workers (73%) saying they are confident they will be able to fully retire with a comfortable lifestyle.
That said, the survey also finds, not surprisingly, that retirement confidence varies across demographic segments. For instance, TCRS found that 34% of workers with HHI of $100,000 or more are very confident about their future retirement, compared with just 14% of those with an HHI of $50,000 to $99,999 and just 11% with an HHI of less than $50,000. In addition, urban workers (at 32%) are more likely than suburban (19%) and rural workers (16%) to be very confident, while full-time workers (at 25%) are more likely than part-timers (15%) to be very confident.
“Demographic influences can profoundly affect a worker’s ability to save, plan and prepare for a financially secure retirement. A greater understanding of these influences can help identify opportunities, envision solutions, and inform public policy priorities for strengthening our retirement system,” notes Catherine Collinson, CEO and President of Transamerica Institute and TCRS.
The Compendium is based on TCRS’ 21st Annual Retirement Survey of Workers conducted in late 2020 among a nationally representative sample of more than 10,000 adults. It offers 35 key indicators of retirement readiness by employment status (full-time, part-time), work arrangements (remote, in-person, hybrid), urbanicity, LGBTQ status, race/ethnicity, caregiver status and household income.
Retirement Readiness
While the survey found that 75% of workers have access to a 401(k) or similar plan by their employer, there is a wide gap in benefits coverage by employment status. A significantly greater proportion of full-time workers (80%) are offered a 401(k) or similar retirement plan by their employer than are part-timers (51%).
And while 42% of part-time workers and 14% of full-time workers are not offered any retirement benefits, the study notes that the SECURE Act will require certain employers to offer retirement benefits to long-term, part-time employees by 2024.
Additionally, the study shows that the estimated median of worker savings in all household retirement accounts is $93,000. However, the level of retirement savings appears to be correlated with household income. TCRS notes that workers with an HHI of $100,000 or more have saved $200,000, while those with an HHI of $50,000 to $99,999 have saved only $47,000, and those with an HHI of less than $50,000 have saved just $3,000. (Note that these figures are estimated medians.)
What’s impacting workers’ ability to save? TCRS notes that nearly half of workers (49%) indicate that debt interferes with their ability to save for retirement. Full-time and part-time workers share similar levels of agreement with the statement at 49% and 48%, respectively. But workers with an HHI of less than $50,000 (at 63%) and LGBTQ workers (61%) were more likely to indicate so, TCRS notes.
In addition, nearly half of workers (48%) agree with the statement, “I don’t have enough income to save for retirement,” including 20% who “strongly agree” and 28% who “somewhat agree.” Not surprisingly, part-time workers (57%) are more likely to agree with the statement, compared with full-time workers (46%).
Tapping into retirement savings. The study further suggests that a concerning percentage of workers are dipping into their retirement savings before they retire. More than a third of workers (34%) have taken a loan, early withdrawal or hardship withdrawal from their 401(k) or similar plan or IRA, including 25% who have taken a loan and 25% who have taken an early and/or hardship withdrawal (including unpaid loans that became withdrawals). Interestingly, full-time workers (at 36%) were significantly more likely to have ever dipped into retirement savings than part-time workers (22%).
Emergency savings. TCRS also found wide differences in the amount of emergency savings that workers report having. Here, TCRS found that workers with an HHI of less than $50,000 have saved just $250, while those with an HHI of $50,000 to $99,999 have saved $5,000, and those with an HHI of $100,000 or more have saved $12,000 (medians).
Retirement fears. Workers’ most frequently cited retirement fears are outliving their savings and investments (42%), declining health that requires long-term care (39%), a reduction in or elimination of Social Security in the future (38%) and possible long-term care costs (34%). Nearly a third (32%) of workers also fear cognitive decline/dementia/Alzheimer’s Disease and not being able to meet the basic financial needs of their family. TCRS notes that retirement fears are relatively consistent across all employment status categories.
Ways to Improve
As part of the compendium, the study suggests that a concerted effort is needed to help improve retirement security. “As we navigate the pandemic and envision the future, we have an unprecedented opportunity to build a stronger, more sustainable, and inclusive retirement system that enables everyone to live, work, and retire with dignity,” notes Collinson. To that end, the study suggests that policymakers should consider:
- addressing Social Security’s funding shortfalls, noting that 73% of workers are concerned that Social Security will not be there for them when they are ready to retire;
- expanding retirement plan coverage among all workers including part-time workers;
- promoting and expanding the Saver’s credit, noting that fewer than half of workers (48%) are aware of the Saver’s Credit; and
- supporting caregivers through Social Security credits, tax credits, and paid family leave.