Nearly Half of Participants Are Saving Less Than 10% of Income for Retirement

Workers are anxious about the effects of a potential recession on their retirement planning, which may be driving greater interest in retirement income options, according to new research.

The Protected Retirement Income and Planning Report, produced by the Alliance for Lifetime Income and CANNEX, says 48% of workers believe their retirement savings and other sources of income will last throughout their lifetime, compared with 55% in 2021. Among workers who have an annuity, 74% believe their savings and income sources will last their lifetime, compared with 43% for those without one, the study found.

“Consumers’ strong desire for protection amid this tricky economic environment is why the alliance is relentless in helping people understand how to protect their hard-earned savings,” Jean Statler, CEO of the Alliance for Lifetime Income, said in a press release. “Not surprisingly, consumers are turning up the heat on their financial professionals and asking them to find ways to protect their portfolios.”

The report shows that overall, 63% of workers worry about their finances several times a month or more often, as 25% worry several times per month, 24% worry every day and 14% fret about finances several times a week.   

Among respondents, 70% said they will be able to fund basic needs in retirement, 23% hope to be able to fund the basics and 3% said “there is not a chance,” the study found. When workers were asked if they would be able to fund “wants” in retirement, 35% said they will be able fund them, while 49% hope to and 11% said “no chance.” For funding “a few splurges” in retirement, 30% said they will be able to fund some luxuries, 48% hope to, 16% said “no chance” and 7% were not sure.

Many workers may not be able to fund the lifestyle they imagine in retirement if their current savings patterns persist, the report says. Data show that 45% of nonretired workers age 45 to 75 are saving less than 10% of their annual income for retirement; more specifically, 27% are saving below 5% and 18% are saving from 5% to less than 10%.

The study also found that 17% of workers are saving 10% to less than 15%; 11% are saving 15% to less than 20%; and 12% are saving 20% to less than 25%.

The report also shows—consistent with data from an earlier iteration of the CANNEX and ALI Protected Retirement Income and Planning Report, which was published earlier this year—that investors place more emphasis on retirement income protection than financial professionals. Whereas 89% of consumers rated income protection as important in the context of retirement planning, 73% of financial professionals said the same. Among consumers, 53% said it is ‘very important’ to include income protection when thinking about your retirement planning, compared with 33% of financial professionals, the study found.

“Unfortunately, the research also shows that many financial professionals are falling short of what their clients expect and want,” added Statler.

Additionally, 54% of consumers who work with a financial professional would grade them an “A” for how much they listen to and understand needs, the report says.

The Alliance for Lifetime Income is a Washington, D.C-based nonprofit that advocates for protected lifetime income in retirement. CANNEX Financial Exchanges is a Toronto-based pricing information provider, with a mission to provide access and transparency to the cost and features of retirement savings and retirement income products.

The study was conducted online by Artemis Strategy Group in April and May among 2,025 American consumers age 45 to 75, and 514 financial professionals who conduct retirement planning for individual clients.