Considering the Full Participant Portrait
Prioritizing market volatility for 65-year-old participants makes sense, but an outsized focus on the market understates the individual’s risk of running out of money in what could be a 25- to 30-year retirement. According to the Employee Benefit Research Institute, the average retirement balance for a full-career participant at age 65 is $280,000, and for many with segmented work histories, balances are considerably lower. To address low balances, many participants today are working longer. Late-career years are key for wealth accumulation, as wages and retirement balances are generally higher than at earlier points in participants’ careers.
Our recent Global Retirement Reality Report (GR3), fielded during May 2020 and capturing participant sentiment amid the COVID-19 crisis, highlights how age plays a meaningful role in retirement optimism and confidence, with those who are mid-career, primarily of the Generation X cohort, feeling the greatest strain. Whether driven by a more complex financial life, a more informed understanding of “what could go wrong” or a larger reconciliation of life’s expectations versus realities, the dip in optimism is noticeable for this group and presents an opportunity for both sponsors and retirement advisors to identify solutions specific to this group’s accumulation needs.