Middle Class Agrees They Are Responsible for Funding Retirement

October 23, 2012 (PLANSPONSOR.com) – Fifty percent of middle class Americans say they are responsible for funding their retirement.

According to results from the annual Wells Fargo Retirement Survey, 27% assign responsibility to employers through pensions, and 24% say the government is responsible for funding retirement through Social Security. While individuals see themselves as primarily responsible for retirement funding, there is a difference of intensity based on party affiliation; 56% of Republicans say retirement is on the shoulder of the individual through savings and investments versus 42% of identified Democrats.     

Despite agreeing they are responsible for funding their retirement, 52% of respondents say their most important day-to-day financial concern is paying the monthly bills, up from 37% a year ago. Saving for retirement is second, with less than one-fifth (16%) naming it a key concern. More than half of pre-retired Americans (53%) say they are not confident they will have saved enough for the life they want in retirement, up from 42% percent in 2011. 

One-third (30%) of Americans say they will need to “work until at least 80,” in order to live comfortably in their retirement years, up from 25% a year ago. Yet, 73% of Americans say their employer would not want them to work in their 80s. Similar to 2011, 70% of middle class Americans say they will work in retirement, with 39% saying they will work out of financial necessity.    

Thirty-four percent of middle class Americans estimate their retirement income will consist of 50% or less of their current annual income.

Americans say the 401(k) is the “best retirement savings vehicle,” followed by the individual retirement account (IRA) and a savings account.  Thirty-four percent of Americans who have a 401(k) available through their employer are saving between 3% and 5% of their income in their 401(k) plan, 32% are saving between 6% and 10%, and 12% are saving 11% or more for their retirement. Those contributing to a 401(k) report more companies are offering the match (77%) this year versus 66% a year ago.    

Although most 401(k) investment options include investment expenses, a majority (82%) of Americans with a 401(k) available through their employer say they do not pay an investment fee on their 401(k) plan.  

Three-quarters of Americans (74%) say employers should provide personal advice to help employees manage their retirement savings; 67% of those who identify themselves as Republican support advice versus 86% who identify as a Democrat.  

Sixty percent of Americans say plans should automatically increase contribution rates by 1% each year; 56% of Republicans agree with this versus 72% of Democrats. Fifty-nine percent of Americans say plans should automatically enroll employees in the plan; 55% of Republicans support auto-enrollment versus 77% of Democrats.  

Middle class Americans say they will need a median of $300,000 to support them in retirement, but to date, have only saved $25,000 (median).  When asked what percentage of their nest egg they expect to withdraw annually in retirement, the median withdrawal predicted by middle class Americans is 10%. Many experts say withdrawals should be maintained at 3% to 4%.

Forty percent of middle class Americans without a written retirement plan say they have not planned for retirement because they are too focused on “current financial obligations.” This is particularly true for people in their 50s, of which 54% say they are too focused on today to plan for the future.  

Half of middle class Americans (51%) say they need to “significantly” cut back on spending money in order to save for retirement, and this jumps to 61% of those who are in their 50s–prime retirement saving years.   

Other findings of the survey include: 

  • 70% of middle class Americans say they are not confident in the stock market as a place to invest for retirement; 
  • Three-quarters (75%) of Americans describe their calculations for retirement to be some sort of a guess, and 22% describe their planning efforts as detailed and based on “calculations”; 
  • When provided with a list of activities, middle class Americans say that in the last 12 months, they have spent the most time ‘planning’ a home remodel, followed by planning a vacation. Planning for retirement fell to third place in the list; 
  • A little more than one-third (36%) of Americans has a written plan for retirement, up from 30% in 2011. Forty-six percent of people between 50 and 59 attest to a written plan; 
  • Middle class Americans believe the median cost of their out-of-pocket health care costs in retirement will be $47,000. The Center for Retirement Research has estimated a typical couple at age 65 can expect to spend $260,000 or more over their remaining lifetime; 
  • If given $5,000 to invest for retirement, 40% say they would invest it in a CD or savings account, 24% would invest in stocks and 22% say they would invest the money in gold or precious metals. Thirty-seven percent of middle class Americans in their 30s would invest the money in the market versus 18% of Americans between the ages of 25 and 29.  


A telephone survey was conducted by Harris Interactive on behalf of Wells Fargo of 1,000 middle class Americans, ages 25 to 75, between July 9 and September 4.