More than half (54%) of the 1,000 people polled expect to work full or part time after they turn 65. This as nearly half (48%) of the sample is concerned they have not saved enough for retirement and 15% say they never want to retire. Of those that have no plans to retire, 33% are aged 60 to 69, according to the latest release of the “Merrill Lynch Retirement Preparedness Survey.”
“These results point to a dramatically different human resources challenge for employers as aging Americans will remain in the workplace longer, or seek more flexible work arrangements,” said Cynthia Hayes, first vice president, Employer Plan Solutions for the Retirement Group at Merrill Lynch. “Employers will increasingly need to evolve their culture to one that embraces older workers and creates the work balance being sought.”
There is a disconnect in what workers expect out of retirement and they want. Seventy-nine percent of those canvassed though look forward to retirement and 75% look forward to taking it easy, which 34% expect to do with no change to lifestyle or income, compared to 38% that expect a change in lifestyle and 28% that expect a change in income.
Asked where the money to live on in retirement is going to come from, 33% said their primary source will be their defined contribution plan, followed by:
- 23% – savings
- 16% – social security
- 15% – defined benefit plan
- 9% – Individual Retirement Account (IRA)
- 2% – work part time.
Surprisingly, given such a large percentage dependant on defined contribution savings, workers are uneducated about how these plans work. Fifty-eight percent mistakenly believe 401(k) are guaranteed by law, up to certain amounts and 66% say they prefer investments that pay a set dollar amount each month throughout retirement, depending on how much they contribute.
Further, respondents expect to live on 74% of their pre-retirement income, yet few appear to be saving enough to reach that level. At an average age of 46 and an income of $55,000, respondents have only accumulated average savings of $51,000. As for current savings, 17% is the average amount of income respondents say they are saving for retirement and 10% is the average among of income the sample say they are contributing to employee plans.
In spite of this apparent shortfall, slightly more than half of Americans (51%) are confident that they will have saved enough money to live on in retirement, with 22% being the average annual rate of return the group expects to receive from their personal investments once they retire.
Getting The Word Out
“With much of the workforce at their peak earning years, employers have a timely opportunity to help individuals maximize savings opportunities through employer sponsored plans and reinforce the need for a self-sufficient retirement future,” said Hayes and the data shows employees are ready to listen.
One third of the survey sample plan to increase the amount they are contributing for retirement during the next year and nearly seven out of 10 (69%) participants in an employer sponsored retirement plan say they would be spurred by higher salary to contribute more to their savings plan.
Further, there appears to be a need for financial advice that magnifies the importance of personal savings during the accumulation years, as well as the equally important need for income management during retirement. Sixty-four percent of Americans do not have a financial plan in place, yet three-quartersay that retirement is the primary reason they invest. Further, 52% say the type of financial advice they need most is retirement related.
The survey sample includes respondents between the ages of 25 and 69. Respondents were nearly evenly split between men and women and 57% participate in (or are making withdrawals from) a retirement plan funded by payroll deductions.