Retirement Confidence Recovering from Great Recession

Still many express common fears about retirement.

With research support from Nielsen and the Harris Poll, the Transamerica Center for Retirement Studies has published the 17th edition of its annual retirement survey—offering an in-depth look at the U.S. retirement savings industry via more than 300 pages of data and graphics. 

The research presents more than 50 measures of retirement preparedness, as well as higher-level five-year trend analyses looking at overall survey findings among workers of for-profit companies of 10 or more employees. The report also examines the influences of demographic shift on retirement preparations among the private U.S. workforce.

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At a high level, researchers find once again that many American workers say they are still recovering from what is commonly referred to as the Great Recession. Markets may be pushing record highs once again, but this has not offered much help for those who have faced extended periods of unemployment, those who liquidated savings/investments to pay for daily life, those who lost houses in foreclosure, etc. 

Indeed, the data shows 41% of people say they have “somewhat” recovered, with 13% percent saying that they have not yet begun to recover and 7% saying that they may never recover from the last recession. However, 39% of workers say that they have either fully recovered (20%) or were not directly impacted by Great Recession (19%).

Against this backdrop, the research shows most workers are at least nominally focused on saving for retirement—and they have varying degrees of confidence they will be able to retire comfortably.

“Retirement confidence has recovered but plateaued,” researchers suggest, noting that 62% of workers are confident that they will be able to fully retire with a comfortable lifestyle, including 15% who are “very confident” and 47% who are “somewhat confident.” In addition, Transamerica finds just about half of workers (51%) agree that they are building a large enough retirement nest egg.

NEXT: Many factors play into retirement readiness 

The Transamerica survey finds workers’ most frequently cited retirement fear is “outliving my savings/investments” (51%), followed closely by “Social Security will be reduced or cease to exist in the future” (47%) and “declining health that requires long-term care” (45%).

Facing down these problems and others, workers are having to plan to draw on diverse sources of income during retirement. Self-funded savings, including tax-qualified retirement accounts and other savings, along with after-tax investments, are the most frequently cited sources of retirement income expected by workers. Social Security, company funded plans, home equity, and inheritance are less frequently cited among workers. 

“Interestingly, 38% cite ‘working’ as an expected source of retirement income,” researchers point out, despite evidence that most actually find it undesirable or difficult to find work in retirement, say for health or skill-related reasons.

Other findings show the participation rate among workers who are offered an employee-funded retirement plan is 77%, while the median percentage of salary being saved is 8% of annual pay. While a variety of explanations were offered, the leading reason cited among eligible employees for not participating in workplace retirement plans was “being financially stretched.” Somewhat encouraging, almost one in five cite that they save for retirement in other ways.

Also positive, 32% of workers who are currently participating in a 401(k) or similar plan say that they have increased their contributions in the past 12 months. Sixty-one percent indicate they did not change their contribution rate, while 6% decreased their rate and 1% stopped contributions altogether in the last year.

NEXT: Satisfaction with benefits remains high

“Among workers who are offered a retirement plan by their employer, the majority (72%) strongly/somewhat agree that they are satisfied with their plan,” researchers explain.

Speaking directly to employers, the analysis shows that when selecting between two hypothetical job offers, workers are equally likely to say they would select a job with a higher than expected salary, but poor retirement benefits (50%) versus a job with excellent retirement benefits, but only meeting minimum salary requirements (50%). But at the same time, the majority of workers (60%) whose employers do not offer a retirement plan would be likely to switch jobs for a similar job with a retirement plan.

Three in five workers who participate in their employer-sponsored 401(k) or similar plan say they use some sort of automatic allocation approach to investing their retirement plan assets, such as a managed account, strategic allocation fund and/or target-date fund. Another 41% prefer a more do-it-yourself approach and set their own asset allocation percentages among the available funds.

Looking forward, many of the workers and employers surveyed hope the federal government can set retirement security priorities for 2017 and beyond.

“With the November 2016 election in mind, workers most frequently cite fully funding Social Security (58%) as a priority for the new President and Congress to help Americans prepare for a financially secure retirement,” the analysis explains. “Other top cited responses include encouraging 401(k) plans to offer the option to pay retirement benefits in a form that guarantees retirees a set monthly income for life (46%), and encouraging employers with a 401(k) or similar plan to enable their part-time workers to participate in the plan (38%).”

The full research report is available for download here

Representative Johnson Proposes Social Security Reform

The legislation would increase the full retirement age for claiming benefits, among other things.

House Ways and Means Social Security Subcommittee Chairman Representative Sam Johnson (R-Texas) introduced legislation he says will permanently save Social Security.

Johnson notes that this year, the Social Security Trustees Report warned workers will face a 21% benefit cut starting in 2034 if Congress does not reform the program.

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The Social Security Reform Act of 2016 will:

  • Modernize how benefits are calculated to increase benefits for lower income workers while slowing the growth of benefits for higher income workers;
  • Gradually update the full retirement age at which workers can claim benefits to 69. The new retirement age better reflects Americans’ longer life expectancy while maintaining the age for early retirement;
  • Ensure benefits keep up with changes in the economy by using a more accurate measure of inflation for the annual cost-of-living-adjustment;
  • Protect the most vulnerable Americans by increasing benefits for lower-income earners and raising the minimum benefit for those who earned less over the course of long careers;
  • Promote flexibility and choice for workers by eliminating the Retirement Earnings Test for everyone. This allows workers to receive benefits—without a penalty—while they are working, or fully delay retirement and wait to receive benefits. For those who delay claiming benefits, they can receive increases in a partial lump sum or add it all to their monthly check;
  • Encourage saving for retirement by phasing out Social Security’s tax on benefits for workers who continue to receive income after they retire or stop working due to a disability;
  • Target benefits for those most in need by limiting the size of benefits for spouses and children of high-income earners; and
  • Treat all workers fairly when their Social Security benefits are calculated by using the same, proportional formula that looks at all of an individual’s earnings over the course of his or her career.

Full text of the legislation is here

Earlier this year, Congressman Reid Ribble (R-Wisconsin) introduced the Save Our Social Security Act in order to make Social Security solvent for another 75 years.

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