The more things change, the more things stay the same. Despite economic well-being generally improving over the past five years, a new report by the Federal Reserve finds that concerns about inadequate retirement savings are still common.
The May 2018 Report on the Economic Well-Being of U.S. Households in 2017 finds that less than two-fifths of non-retired adults think their retirement savings plan is on track, while more than two-fifths think it is not on track and about one-fifth are not sure. In fact, a quarter of the non-retired adults polled indicated they have no retirement savings or pension whatsoever, the report notes.
The report draws from the Board’s fifth annual Survey of Household Economics and Decisionmaking (SHED) conducted among more than 12,000 people in November and December 2017, who were asked about their experiences on income, employment, banking, housing, education and retirement planning, among other topics.
Not surprisingly, self-assessments of retirement preparedness were found to vary with the amount of current savings and time remaining until retirement. Adults under age 30 typically believe that their savings are on track if they have at least $10,000 set aside for retirement, which included 71% of respondents ages 18-29 who agreed with this assessment. The amount needed for a majority to think they are on track increases as people near retirement, rising to at least $100,000 among those age 40 and older, where 67% of respondents age 40-49 agreed with this assessment.
Among those with self-directed retirement savings, comfort in managing these investments is mixed. According to the report, 60% of non-retirees with these accounts have little or no comfort managing their investments. On average, women of all education levels (31%) and less-educated men (41%) are less comfortable managing their retirement investments, while 60% of men with at least a bachelor’s degree are largely comfortable making these investment decisions.
As for when to retire, a desire to do other things than work or to spend time with family were cited as the most common factors. Poor health, however, was also cited as a contributing factor among a significant number of respondents, with two-fifths of retirements before age 62 and one-third between ages 62 and 64. Nearly 25% of those who retired before age 65 said the lack of available work contributed to their decision.
For income in retirement, the report shows that:
- 86% of retirees in 2017 received Social Security benefits;
- 56% draw on a DB plan; and
- 58% use savings from an IRA, 401(k) or other DC plan.
Overall, the report notes that economic well-being has generally improved over the past five years, with 74% of adults reporting that they were doing at least okay financially in 2017 — up 10 percentage points from the first survey in 2013. Despite these improvements, however, the report emphasizes that notable differences remain across race, ethnicity, education groups and locations.
