Americans Open to More Investment Risk to Improve Retirement Savings

Americans have growing concerns about how they’ll build their retirement nest egg, according to new research by Hearts & Wallets.

Less than one-third of accumulators feel their retirement savings are on track, a drop of seven percentage points from two years ago. The decline was across all life stages with the largest decrease among those nearing the traditional age of retirement, Late Careers (ages 53 to 64), falling five percentage points in one year. One-third (31%) saving for retirement are unsure how they will fund their retirement, especially households with less than $100,000 in investable assets.

As consumers struggle to identify retirement income, they are becoming more open to using the resources offered by their employer-sponsored retirement savings plans. Mid-Career (ages 40 to 52) are now as receptive as younger consumers, with 45% agreeing they would “use retirement planning resources provided through my employer, or would if they were offered.”

National anxiety levels and concern about the future declined in 2016, falling from 17% in 2012 to 12% in 2016. Older consumers feel better than younger people. More than one-third of younger Americans (35%) now express high or moderate anxiety, up from 27% in 2014. Almost all Americans wish they were saving more. Those who strongly agree that they wished they saved more increased to 34% up from 28% in 2010, with agreement being very high among the young.

More consumers (27%) are comfortable accepting volatility in the hope of getting higher returns, up from 22% in 2015. Consumers are dealing with the new barrier to retirement asset growth, the first since 2008, as retirement assets had grown steadily the last seven years. Likewise, aggregate investable assets were flat in contrast to a big gain among the wealthy in 2014. A bright spot was the 700,000 households with $50,000 to less than $250,000 that built their assets through increased savings.

The survey also found building an emergency fund has become even more important in a year when total household investable assets and retirement asset growth were flat. In addition, savings allocation is a largely unmet need for an investor segment that is 41.1 million households with $5.2 trillion in investable assets who say they find it difficult or extremely difficult to decide where to put savings, such as to make an extra mortgage payment or contribute to an IRA.

“Plan sponsors and advisers should understand the mindset of this segment of investors and the importance of financial information to help them sort through savings priorities. Hearts & Wallets research finds that simply saying invest in your 401(k) will ring hollow when investors have many competing priorities. Marketing and messaging should be phrased to recognize and engage investors,” the company says.