Most workers over age 40 don’t have sufficient retirement
savings and aren’t setting aside enough to catch up, according to a survey from
the Insured Retirement Institute.
Despite the nest egg shortfall, many still expect to retire
early and believe they will have ample retirement income.
More than half of older Americans have less than $50,000 for
retirement. But the majority aren’t increasing savings to boost their nest
Nearly six in 10 workers save less than 10% of their income
and a third set aside less than 5%, the survey revealed.
Moreover, many have unrealistic plans, with 46% planning to
leave the workforce at age 65 or earlier, and workers’ expectations for future
income don’t align with current savings.
More than one-half of workers think they will need more than
$55,000 per year, and one-third expects to need in excess of $75,000, survey
“It’s something we see fairly consistently whenever we
research the retirement readiness of American workers,” said Frank O’Connor,
vice-president of research and outreach at the Insured Retirement Institute.
While the survey doesn’t examine the reasons for the
workers’ attitudes, seeing their parents’ stable retirement — which may include
pension income — may be skewing their views, O’Connor said.
Although 67% of private industry employees have company-provided
retirement plans, workers are increasingly less likely to have access to a
pension, according to the Bureau of Labor and Statistics.
Since most of today’s workers can’t rely on a pension,
workers need to prioritize savings and may need to delay Social Security for
higher payments, O’Connor said. But the survey shows many employees aren’t
taking that approach.
“That’s a pretty perfect storm in a pretty bad way for a lot
of folks,” he said.
If someone expects to retire early or wants a specific
income in retirement, they may consider working with a financial advisor to
crunch the numbers, he said.
Additionally, workers may soon get estimates from 401(k)
plan providers showing the estimated monthly income from their nest egg, which
may be a “wake-up call for a lot of folks,” O’Connor said.
In the meantime, someone may plug their savings into an
online retirement calculator for a rough gauge. However, some calculators may
be overly simplistic, failing to account for long-term care expenses and other
factors, he said.
Still, seeing the estimates, such as projected retirement
income, may motivate some workers to ratchet up savings, O’Connor said.
“There are plenty of folks in this study that still have a
good amount of time to build savings,” he added.
The Retirement Readiness Among Older Workers 2021 report is
based on an online survey of 990 American respondents from ages 40 to 73 years
old working part-time or full-time in March 2021. The findings reflect
responses across all age cohorts.
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