Americans on average expect to retire two years sooner than they did five years ago, and many more say they intend to retire before age 60, potentially reflecting a jump in 401(k) balances, new research shows.
Findings from MassMutual’s 2018 “State of the American Family” study reveal that respondents on average expect to retire at age 62, compared with age 64 when the study was last conducted in 2013. What’s more, 40% of respondents intend to retire before age 60, up from 32% five years ago, while only 22% of respondents now expect to retire after age 65, down from 30% in 2013, according to a fact sheet.
That optimism may be misguided, however, as the study also shows that fewer people indicate they have calculated how much income they need to retire. In 2018, 56% of respondents have actually performed the math compared with a slightly higher 61% in 2013, the study notes. Additionally, the percentage of respondents who indicate they have developed a plan for retirement savings hasn’t changed much in the intervening five years, registering at 36% in 2018, compared with 35% in 2013.
“There is greater optimism about retirement and people’s ability to retire sooner rather than later, which may be attributed to the growth in the financial markets and a spike in Americans’ retirement savings during the past five years,” notes Tom Foster, spokesperson for MassMutual’s Workplace Solutions unit. Foster adds, however, that “many Americans may have a false sense of security when it comes to being ready to retire.”
For comparative purposes, the researchers examined responses from a subset of the 2018 study’s respondents with household incomes of $75,000 or more, and compared the responses with a similar survey conducted in 2013.
The study further found that ownership of retirement savings products such as a 401(k), 403(b) or 457 plan was up slightly at 84% in 2018 compared with 82% in 2013, while investments in stocks, bonds or mutual funds held separately from a retirement account reportedly were flat.
From the time MassMutual last conducted its study in 2013, it’s interesting to see from a comparative perspective that the Dow Jones Industrial Average closed at 25,131 on March 1, 2018, when the firm conducted its research, but registered at 14,054 on March 1, 2013. The unemployment rate was 3.7% in October 2018, down from 7.2% in October 2013.
Meanwhile, confidence about being ready to retire at a given age rose from 45% in 2013 to 47% in 2018, according to the study. Conversely, confidence in having enough money to last throughout retirement has slipped. The study notes that in 2018, 35% of respondents say they worry about outliving their retirement savings, compared with 33% in 2013.
“We urge pre-retirees to calculate their projected income and expenses in retirement before taking the plunge to ensure they are financially prepared for retirement,” Foster notes. “While 401(k) balances are healthier than they were five years ago, they may not necessarily be sufficient to support the income needed for so many early retirements. Look before you leap.”
The survey was conducted by Isobar from Jan. 19-Feb. 7, 2018, via an online questionnaire, comprising 3,235 total interviews. The vast majority of these interviews (2,730) were conducted with individuals aged 25-64, with household incomes of $50,000 or more and dependents under age 26 for whom they are financially responsible. Respondents had to contribute at least 40% to decisions regarding financial matters in their household to qualify.
