When it comes to living a comfortable retirement and having enough money to retire, workers throughout the world share many of the same concerns, according to a new global survey.
The most frequently cited retirement concerns are declining physical health (50% global and 44% U.S.) and running out of money (40% global and 49% U.S.), according to “The New Social Contract: Empowering individuals in a transitioning world.” The report is a collaboration among Aegon Center for Longevity and Retirement (ACLR) and nonprofits Transamerica Center for Retirement Studies® (TCRS) and Instituto de Longevidade Mongeral Aegon.
It also finds that just 23% of people globally and 31% in the U.S. are “very/extremely confident” that their health care will be affordable in retirement. Additionally, two in five people globally (41%) and more than half in the U.S. (51%) feel stressed about their long-term financial plans for retirement at least once per month.
Based on a global survey of 16,000 workers and retirees in 15 countries spanning the Americas, Europe, Asia and Australia, the report builds on last year’s edition calling for a “new social contract,” by outlining fundamentals for retirement readiness that individuals should be taking, as well as specific recommendations for governments, employers, and industry partners.
“A new social contract for retirement is necessary as Social Security and traditional pension plans face funding issues, in part due to increases in longevity, and individuals face the need to self-fund a greater portion of their retirement income, often without adequate support to do so,” notes Catherine Collinson, CEO and president of nonprofit Transamerica Institute and TCRS, and executive director of ACLR.
A New Social Contract
While individuals recognize that retirement and health care systems are becoming less sustainable, they are not yet taking all the necessary steps to protect their own health or build their savings, the report notes.
Interestingly, the survey finds that the obstacles that prevent people from living healthy lives are similar to what prevents them from saving for retirement. For example, a perceived lack of earnings (25%) and work-related time pressures (24%) comprise the key barriers to healthy living, while a professed lack of earnings (35%) combined with other immediate priorities (22%) are the biggest obstacles for retirement saving.
Globally, the survey finds that people are expecting the government to provide 46% of their total retirement income, representing the largest single source of retirement income. They also are expecting 30% of their retirement income to come from their own savings and 24% from employer retirement benefits.
But with the proportion of these sources of retirement income expected to increasingly shift toward personal savings, individuals need to be proactive in anticipating and developing their retirement plans, the report emphasizes. “Addressing the obstacles faced by individuals requires a new approach to retirement planning that incorporates both health and wealth elements – and taps into human behavior to nudge people toward taking action,” the authors note.
For employers, this includes incorporating the creation of simple default positions – based on the research of behavioral economists – that make it easier for people to make sound financial planning-related decisions along with lifestyle choices that can optimize health outcomes.
In addition, employers can become more proactive in facilitating retirement planning by providing guidance and advice, including by providing annual retirement plan statements, illustrating the current value of an employee’s savings, as well as retirement income, forecasting tools and face-to-face workplace seminars with financial planners.
Globally, the survey finds that only 20% of workers indicate they currently receive an annual retirement plan statement (29% in the U.S.) while just 14% have access to digital tools to help them manage their retirement savings (18% in the U.S.). More than one-third of workers (35%) indicate they do not receive any of these services through their employers or retirement plan administrators (27% U.S.).
The report is based on findings from the 8th Annual Aegon Retirement Readiness survey conducted online between Jan. 22 and Feb. 14, 2019.
