The economic downturn since the 2008 financial crisis, and the resulting unemployment and stock market drops, have significantly impacted Americans’ retirement savings according to a new report, The Changing Face of Retirement: The AEGON Retirement Readiness Survey 2012, United States Factsheet.
AEGON, a life insurance, pensions and asset management company, conducted the research in collaboration with the Transamerica Center for Retirement Studies and Cicero Consulting. Interviews with employees and retirees were conducted in January and February of 2012.
Declines in the prevalence of traditional employer defined benefit pension plans and concerns about the sustainability of Social Security have led most Americans to rely less on prospects of a government or employer-funded retirement and to rely more heavily on their private savings and workplace defined contribution 401(k)-type plans, according to the survey report. The uneasy foundation of the retirement system and the economy that sustains it is not lost on Americans: 67 percent think that future generations of retirees will be worse off than current retirees, the survey found.
The following are among the principle findings from the survey:
• Phased retirement expected to increase: 63 percent of current American retirees immediately stopped work on entering retirement, but 73 percent of current employees expect to continue working in some form as retirement becomes a phased transition from full-time working to partial retirement that still involves some type of work-related activity.
• Need for Social Security reform accepted: Only 9 percent believe that the current retirement system could remain affordable without reform or tax increases. Three-fourths are willing to accept some tax increases to keep Social Security viable.
• An emerging savings culture: Despite the pressures of the financial crisis, 58 percent disagreed with the idea that the financial crisis would make them less likely to save at all, and 46 percent make sure to always save for retirement.
Call to Action
The report recommends that employers and policy makers take several actions to promote retirement readiness. For instance:
• Address those with special needs. There are distinct pockets where retirement readiness is significantly below average, such as among women and those without college degrees. Targeted education can address the special needs of these groups.
• Simplify savings. While the most cited incentive to save for Americans was more pay, 29 percent desired simpler financial products. Simplifying savings methods in the retail market may lead to greater retirement readiness.
• Provide incentives. As individuals accept that Social Security requires significant reforms and is on its own inadequate, government should accompany reform with a drive to incent and encourage private savings.
Companion Retirement Readiness survey reports comparing attitudes and expectations in the U.S. and among European nations can be found here.
Encourage Employees to Defer Adequate Pay to Their 401(k), SHRM Online Benefits Discipline, May 2012
Study Finds Challenging Retirement Realities for Women, SHRM Online Benefits Discipline, May 2012
Secret to a 401(k) Plan’s Success: The Income Replacement Ratio, SHRM Online Benefits Discipline, April 2012
Providing Flex Options to Older Workers Yields Strategic Benefits, SHRM Online Benefits Discipline, April 2012
Auto Enrollment Boosts 401(k) Participation Among Minorities, SHRM Online Benefits Discipline, October 2011
Report: Driving Improved Savings Behaviors, SHRM Online Benefits Discipline, October 2011
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