By Pension and Benefits Editorial Staff
Americans are dramatically underestimating their financial needs in retirement, but they do not seem to realize it, according to a recent report from Natixis Investment Managers. More than two-thirds (67 percent) of American workers with access to a workplace retirement savings plan say they expect to have enough money saved for retirement to live as they want, or at least comfortably, as long as they are careful with spending. Yet the survey showed that their basic assumptions—about when they can retire, how much they need to save and how long their assets will last—are flawed.
Natixis noted that today's multi-generational workforce is struggling with different competing financial pressures, and they say the everyday cost of living is the biggest barrier holding them back from saving more for retirement. Sixty-four percent of workers are looking to their employers for more education, including when and why to start saving and how to invest. Only one in four millennials say they are currently focused on retirement planning while they work toward other goals such as buying a home, having children and paying for education expenses. Meanwhile, nearly half of Baby Boomers (47 percent) regret not starting to save for retirement sooner, and 35 percent wish they had contributed more to their plan.
Natixis surveyed 1,000 American workers with access to a company-sponsored defined contribution plan across three generations active in the workforce and it found that no single generation is getting everything right when it comes to retirement. According to the research:
- The average 64-year-old Baby Boomer has accumulated just 30 percent of the $1 million savings they say they will need to fund a comfortable life in retirement. They have already extended their projected retirement age to 69, but would still need to save more than $142,000 a year to reach their stated goal.
- The average 45-year-old Gen Xer, who has saved an average of $166,328, will need to save at least $42,000 annually to retire by their stated goal of age 64 with just under $1 million.
- Millennials have started saving earlier in life for their retirement, but they also expect to retire earlier—by age 61, on average, thus extending the time over which their assets will need to be annuitized by 10 percent. They also have set a lower total savings goal of $822,789 to fund their retirement years, which to reach, would mean boosting their annual savings by 19 percent.
“The ability to live comfortably in retirement is a basic premise of the American Dream along with access to decent housing, health care and education. Right now, it's just a pipe dream for many hard-working Americans who need help saving, beginning with a reality check of the assumptions behind retirement planning,” said Ed Farrington, executive vice president of retirement strategies at Natixis Investment Managers. “Financial security in retirement relies heavily on personal savings and setting long-term achievable goals; however, many Americans are increasingly suffering competition from other financial pressures. In order to lead more American workers to a secure retirement, it will require a combination of solutions to improve access to savings plans, education, advice and incentives along with a coordinated effort among individuals, employers, policymakers, and asset managers.”
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