Americans are refreshingly optimistic about retirement, although there is room for enhanced financial fitness, with a little help from their employers.
In this snapshot, we examine the sanguine views of the Americans surveyed (all of whom participate(d) at some level in a DC or private savings plan) against the very real risk of savings shortfall — and recommend actionable tips on how employers can provide support.
Americans see themselves in the driver’s seat
An overwhelming majority (86%) of Americans embrace the view that they are responsible for making sure they have adequate income in retirement — as opposed to the state or their employer — reflecting the highest ownership sentiment of all countries surveyed.
They also have a realistic idea of what level of income they are likely to require in retirement. In fact, pre-retirees’ expected income replacement ratio (65% of income) closely mirrors actual ratios cited by retirees (64% of income).
They understand what’s “under the hood”
Owning retirement readiness extends beyond seeing oneself as responsible and having realistic retirement income expectations. Americans report the greatest level of investment awareness of the savers we surveyed. What’s more, American retirees appear to be sincerely satisfied with the control they exercise over their DC plans. Nearly 60% report that they are extremely happy with the options they chose in funding their retirement while 80% saw themselves as having significant choice in selecting how they would use their retirement savings. These insights suggest an important connection between awareness, choice, and satisfaction.
Despite Americans’ optimism and awareness surrounding retirement issues, many still experience savings shortfalls. Approximately 1 in 4 actively working respondents is concerned about not saving enough. Indeed, less than half of US workers surveyed reported saving 10% or more in a retirement plan. To mind the gap, 40% of respondents expect to extend working life while 60% plan to work part-time in retirement to stem the shortfall.
What can employers learn from participants?
Bridging the distance between savings confidence and shortfall will be an ongoing effort, including communication streams and retirement solutions that span the savings journey. Three approaches for activating these strategies follow:
For early savers, develop ongoing communications to help employees understand their degree of retirement readiness and motivate them to stay engaged. Projecting current savings into retirement spending on quarterly statements is one approach to making the seemingly removed retirement experience more tangible and immediate.
For workers looking ahead to the retirement transition, offer participants additional access to advice, either through human or robo advisor channels.
For mature employees nearing retirement, offer retirement income solutions to enhance employees’confidence and support more financially secure retirement outcomes.
There is an opportunity for employers to gain a competitive advantage by offering better retirement benefits. By delivering solutions for the saving and spending phases of retirement, employers have the opportunity to stand out within their industry, attract and retain top talent, and equip mature employees with the confidence to embrace their next act.
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