Working Americans appear to be holding their retirement contributions steady in 2019, even if many are not increasing their rate of savings.
According to Bankrate’s August Financial Security Poll, fewer than a third of working Americans (29%) have increased their retirement savings contribution rate compared to last year. Nonetheless, the percentage of Americans who are saving more has improved steadily throughout the economic recovery. The current rate is nearly double that of 2011, when just 15% of workers had stashed away more than in the previous year.
Only 16% of working Americans are saving less than last year – a figure that’s held relatively consistent between 13% and 18% since 2012, the firm notes. Nearly half of working Americans (46%) say they are saving the same amount as last year, while another 6% said they didn’t contribute to their retirement accounts in either year.
Bankrate observes that these results come on the heels of its survey in May finding that Americans’ biggest financial regret is not saving enough for retirement.
Contribution Boosters
Not surprisingly, the survey shows that workers’ propensity to save for retirement increases steadily with income levels. The highest-income workers in the survey (those earning $75,000 or more annually) were twice as likely to have increased their savings rate compared with the lowest-income respondents (earning $30,000 or less), coming in at 41% to 20%, respectively.
For those who said they are saving less, they were four times more likely to be lowest-income respondents than the highest-income workers (26% to 6%). Of those contributing the same amount as last year, the level of income seemed to make little difference in their savings rate. All income groups reported between 44% and 47% of respondents saying they contributed the same as last year, the study notes.
Age also appeared to make little difference. The likelihood of higher contributions was consistent across ages 23-64, with older millennials (ages 30-38) being the most likely to say they increased their retirement savings rate (32%). Yet, for workers above age 65, contributions were more likely to have declined (23% versus 16%), as the number of hours worked tend to fall for those nearing retirement.
Waiting to Save?
Respondents cited many reasons for why they weren’t saving more for retirement, but the most typical reason might not be what you’d expect.
The most common – at 24% of respondents – was that workers were comfortable with the level of their retirement savings or the amount they were contributing. Older Americans (ages 55 to 73) were more likely to offer this response than younger ones (ages 23 to 38) by nearly a 2-to-1 margin, 32% to 17%.
And when it comes to income, the highest-income earners were more than three times more likely to offer this reason than the lowest-income group (41% to 12%).
For many, the lower savings rate had to do with stagnant or declining income. Nearly a quarter of respondents (23%) named this factor, with lower-income households skewing heavily to this reason at 34%.
Other top responses included 16% of respondents who said they are currently focused on another financial priority, while 12% mentioned rising household expenses as a barrier. Another 12% admitted they hadn’t gotten around to increasing their savings yet, while 8% named an unexpected financial emergency as their reason.
“Saving for retirement needs to be made a bigger priority for the millions of Americans that aren’t saving, got started late, or are behind on their retirement savings,” says Greg McBride, CFA, Bankrate chief financial analyst. He notes that the reasons cited for not increasing retirement contributions indicate “a continued lackadaisical approach to retirement savings,” further observing that some Millennials are missing out on the biggest potential gains because they’re unable to take advantage of the power of compounding.
The Bankrate study was conducted via telephone by SSRS from July 23-28 and July 30-Aug. 4, 2019, among a sample of 2,016 respondents.
