Plan Participants Have Modest Retirement Expectations

Dreams of retiring to a warmer place are taking a backseat as participants’ expectations about life after work are tempered by inflation, other challenges.

It might be time to put to bed the clichéd, sunny depictions of retirees traveling overseas or enjoying their golden years carefree on the beach, a survey from Principal shows.

A key retirement goal for 71% of workers is now merely to maintain their standard of living, according to the latest update of the Principal Retirement Security Survey. Meanwhile, 44% of individuals cited splurging periodically in retirement as a priority. Between these bookends, 47% of respondents said that not outliving their savings in retirement is a top goal.stu

The survey queried workers on their financial habits and concerns. It found that 41% of workers worry they won’t have enough saved to live comfortably in retirement, and 39% said they are paying off student loan debt rather than saving for retirement.

“People are uneasy, and they’re not necessarily feeling that comfortable,” says Sri Reddy, senior vice president, retirement and income solutions, at Principal.

The report shows 60% of workers have created a retirement savings goal, 51% feel they are doing a good job of preparing for retirement and 40% have increased the amount they are contributing to their employer’s retirement plan.

A challenge for participants is that “most people don’t even know what they need to have saved,” Reddy adds.

“A lack of a target or goal, or having a goal that moves because of challenges like inflation, weighs on the employee’s mind,” Reddy says. “It makes it hard to understand how much you have to put away. The volatility and the choppiness that people experience also makes people feel uneasy.”

Workers’ top concerns for retirement, revealed by the survey, are maintaining physical and mental wellness (46%); maintaining current lifestyle (36%); outliving savings in retirement (33%); and possible retirement savings losses because of market fluctuations (33%).

Plan participants are challenged not only by how much to save but also if or when to act or make changes, Reddy says. This is especially challenging during periods of acute market stress, when participants may be getting conflicting messages about “buying the dip” or “waiting for the bottom” before purchasing potentially discounted securities.

“All of those pressures create an ‘interesting’ environment for savers,” Reddy says.

Recognizing all the challenges in the short and long term, plan sponsors are trying to help with financial wellness programs. The survey found that 66% of employers have incorporated financial wellness programs into their benefit offerings, yet only 35% of participants report having used one at work.

At the same time, 28% of employers provide periodic financial wellness campaigns, 25% operate informal financial wellness campaigns and 13% utilize a holistic financial wellness program.  

“This is reflective of the overall level of engagement most employees have with their benefit programs,” Reddy says. “Most people know they want health insurance. They know they need dental coverage. They know that they need to save for retirement, but they’re not necessarily as vested as one would think in understanding the underlying benefits programs and systems.”

The Principal survey was conducted online in March, with a sample size of 215 retirement plan sponsors and 998 U.S. residents age 18 and older who have a financial product or service with Principal.