Employees Need Help Addressing Barriers to Retirement Saving

Nearly one-fifth of all Americans approaching retirement are at the low end of the readiness spectrum (not ready at all), having saved 20% or less of the money they will need for retirement, according to a survey by the Indexed Annuity Leadership Council.

More than 40% of those surveyed report they are worried, with 13% very worried, about retirement.

Overall, American workers are satisfied with the amount of information their employer provides about retirement options. However, workers at small companies (fewer than 50 employees) are two times more likely than employees at larger companies to feel their employer is not helpful at all with retirement planning. Access to planning information correlates with retirement readiness: compared to workers who feel very ready for retirement, unprepared workers show disappointment with the retirement information provided by their employers.

Those pre-retirees who feel most prepared for retirement are almost three times as likely as unprepared workers to have access to pensions. Fifty-nine percent of those prepared have access to a 401(k) plan, compared with 39% of unprepared workers. Further, pre-retirees who feel most prepared are five times as likely to have individual retirement accounts (IRAs), eight times as likely to have mutual funds and 10 times as likely to have an annuity.

Overall, 64% of workers feel satisfied with retirement options provided by their employers. Those in larger companies tend to have higher satisfaction rates regarding the retirement options provided by their employers than those at smaller companies. More than half of all of America’s workforce reports their access to retirement plans and products has either stayed the same or decreased in the past 10 years.

The most common savings mistakes and regrets among survey respondents are not saving earlier (40%), making bad financial decisions (19%), not saving enough (17%) and having personal issues that impacted their ability to save (8%). Personal issues often cited include divorce, marital choice, career path and family illnesses. Ongoing challenges like high daily living expenses (26%) and elevated debt level (24%) also hinder the ability to save.

Workers who are unprepared for retirement are five times as likely as those who are prepared to cite high living expenses as a barrier to retirement planning. They are also seven times as likely to have too much debt. In contrast, 71% of prepared workers don’t face these barriers.

The survey finds pre-retirees are already taking steps to be more prepared for retirement. More than 40% have already adjusted their lifestyle choices/expenses; nearly 14% are taking on multiple jobs to support their retirement savings goals; and nearly 10% have switched jobs for better retirement benefits. The research shows that workers are, above all, looking for lifetime income (78%). This goal is quickly followed by having stability of income (76%) and principal protection (71%). However, having a diversified portfolio was only cited by less than 60% of workers surveyed.

The survey report, “America’s Workforce: The Reality of Retirement Readiness,” may be downloaded from here.