Americans report a positive outlook for retirement with 67% of workers confident they will have enough money to live comfortably throughout retirement, according to the 35th annual Retirement Confidence Survey from Employee Benefit Research Institute (EBRI) and Greenwald Research.
However, the survey also found concern about changes to the U. S. retirement system, specifically reductions in Social Security and Medicare benefits. Also, inflation remains a concern for workers on how it will impact their ability to save.
Workers “generally appear to be remaining confident about their retirement prospects, however, they are concerned that … Social Security and Medicare will be cut.” said Craig Copeland, director, Wealth Benefits Research, EBRI. “The concern about Social Security is especially prominent ... In addition, workers are concerned about inflation negatively impacting their ability to spend as well as the volatility of the stock market. Not only are workers concerned about having to cut their spending, but they are also concerned that the higher costs will reduce their ability to save as much as they want.”
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Workers remain concerned that the increasing cost of living will make it harder for them to save as much as they want. Having no savings, being unable to afford to retire, and inflation were the top concerns voiced by less confident workers. Over seven in 10 workers are worried about making substantial cuts to spending because of inflation, the stock market being volatile, and housing costs rising.
However, workers would like help saving for emergencies through their retirement plan. About two-thirds of workers believe they have enough savings to handle an emergency expense. Additionally, almost half of workers have planned how they will cover an emergency expense in retirement. Seven in 10 workers feel they would likely use an emergency savings account that they could contribute to using payroll deduction, if available through their employer.
More workers expect to retire later and many plan to work in retirement. While the median expected retirement age for workers has held steady at 65, a growing share reports their plan to retire at 70 or beyond. Two in 10 workers also adjusted their target retirement age in 2024, with most of them now planning to retire later.
Guaranteed income is an improvement
Guaranteed income options are appealing to workers, especially as part of their workplace retirement plan. Among workers who are offered a workplace retirement savings plan, around 3 in 10 believe having investment options that provide guaranteed lifetime income to be the most valuable improvement to their plan.
Around 7 in 10 Americans found a workplace plan default investment option that includes an allocation to guaranteed lifetime income appealing. About three-quarters of workers, significantly more than retirees, were interested in this option.
A quarter of workers who are contributing to their employer’s retirement savings plan expect to use savings from their workplace retirement savings plan to purchase a product that guarantees monthly income for life once they retire. Over half of workers expect a guaranteed income product to be a source of income in retirement.
These guaranteed income options “need to continue to evolve and as these workers who are looking for these options actually choose them, a track record can be established to start a broader use of these products,” said Copeland.
Related: Retirement Readiness Index: It’s a wake-up call, as ‘too few’ are prepared
Americans desire help from financial advisors for retirement planning, but less than half work with a financial advisor, according to EBRI. While 4 in 5 retirees and three-quarters of workers believe they have the right educational and support resources to help with major financial events in their lives, 2 in 5 workers say they do not know where to go for financial or retirement planning advice.
At least 7 in 10 Americans agree that financial services companies understand how to help them with retirement and financial planning, showing confidence in their institutions.
Those who seek financial help want to cover topics like if they have enough saved or are saving enough for retirement, investing outside their workplace plan, creating a plan for long-term care expenses, and what they plan to do with their workplace retirement savings plan when they retire.
“The programs that appear to be more successful have been financial wellness initiatives offered through employers that provide individual specific recommendations,” said Copeland. “This allows workers to find advice that directly helps them instead of general information. This could involve financial coaching or other direct financial advice services.”
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
