While the Great Recession continues to alarm workers, those who adopt a “planning mindset” were found to have more retirement savings, less stress and are more likely to be “thriving” in life, according to a new study.
Now in its ninth year, the 2018 Wells Fargo Retirement study, which examines the attitudes and savings of working adults and retirees, finds that those who have taken on this mindset have three times more retirement savings than someone without it. Additionally, they are 42% less likely to have high levels of financial stress.
For example, the median retirement savings level for working men with the mindset is $150,000 versus only $60,000 for those without the mindset. Similarly, the median savings level for working women with the mindset is $75,000 versus only $30,000 for those without it.
Across all workers in the survey, 84% of those with a planning mindset say they regularly contribute to retirement savings versus 66% of those who do not have this mindset. In addition, 82% of workers who have access to a 401(k) say they would not have saved as much for retirement if not for the 401(k).
Adopting the Mindset
According to the study, the mindset centers around four specific statements that – when the attitudes and behaviors are affirmed by workers – correlate with a significantly better financial life. These are:
- “I am able to work diligently toward a long-term goal.”
- “I prefer saving for retirement now, to ensure I have a better life in retirement.”
- “It makes me feel better to have my finances planned out in the next 1-2 years.”
- “In the past six months, I have set and achieved a goal or set of goals to support my financial life.”
Adopting this mindset is particularly imperative across all ages and income levels, the study emphasizes. “Employees just starting out in the workforce today face a retirement savings and spending journey of 60 to 70 years, and they are being made responsible for managing more of this effort on an individual basis,” notes Joe Ready, head of Wells Fargo Institutional Retirement and Trust.
“Those closer to retirement still have a savings and investing horizon that is 25 or 30 years, or longer. Regardless of income, establishing a financial plan today and maintaining a focused set of financial goals can deliver many benefits,” Ready adds.
Longevity Challenges
Meanwhile, fewer people (27%) with the planning mindset view living to age 85 or longer as a financial hardship, as compared to 43% of those who do not have the mindset.
Similarly, only 32% of workers with access to a pension and a 401(k) indicate that living to age 85 or beyond would be a financial hardship. Yet, for those without access to a 401(k) or a pension, this concern for hardship in the future jumps to 45% of workers.
And while 85% of respondents say retirement will be a “positive new chapter in life,” 40% say they are not confident they will have enough retirement income to cover their needs.
To help with planning, 86% of workers agree that it would be “valuable” if their 401(k) plan provided a statement on how much they could spend each month in retirement, based on their current and projected savings.
Younger workers also would like to see their employer provide more help with their retirement choices, with 73% of Millennial workers and 63% of Gen X workers saying they would like more help from employers, compared to only half of Baby Boomers.
“It is important for employers to recognize the role they play as they consider services to help people manage the bulk of their retirement nest egg — not justtobut throughretirement,” adds Ready. “As the sponsor for their retirement plan, the employer is increasingly seen as a trusted source of information for retirement planning among younger workers.”
The study was conducted by The Harris Poll on behalf of Wells Fargo from Aug. 6-20, 2018, and included 3,563 online interviews of 2,560 working Americans 21 or older and 1,003 retired Americans.
