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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.
The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Investing involves risk including the risk of loss of principal.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.Investing involves risk, including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
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This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
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