While most Americans realize retirement will be the biggest purchase of their lifetime—costing 2.5 times the cost of an average home—81% say they do not know how much money they will need to fund their retirement, according to a study from Bank of America Merrill Lynch, in partnership with Age Wave.
While most people say they want to live to the age of 90, only 27% of pre-retirees age 50 and older feel financially prepared to fund a retirement that lasts 10 years, let alone 20 to 30 years. The study found Americans are saving only a fraction of what they think they should: 5.5% vs. 25% of their annual income (after taxes).
More than half of Millennials feel a secure retirement is beyond reach, compared to 30% of Baby Boomers who feel this way. And Millennials expect 65% of their retirement income to come from personal sources, including savings and continued employment, far more than earlier generations.
The three biggest retirement-related financial worries for most Americans are a costly health issue impacting them or loved ones; inflation—the rising cost of living; and not having enough money to do what they would like. Respondents say the cost of basic expenses and prioritizing paying down debt are the two biggest barriers to saving more for retirement. And they are far more concerned about “their” personal economy than “the” economy.
Among those saving for retirement, the top triggers that got them saving were an employer offering a retirement savings plan (46%) or information about retirement benefits (26%), rather than reaching a certain age.
However, half of age 50 and older pre-retirees say they do not have a positive role model when it comes to financial planning, and 65% of Americans say the language of finance is confusing and not user-friendly. “This … opens doors for employers to play an even larger role in empowering Americans to financially prepare for their futures,” says Kevin Crain, head of Workplace Financial Solutions at Bank of America Merrill Lynch. NEXT: Americans willing to make course corrections