55-Year-Olds Twice as Likely to Rely on 401(k) Compared to Predecessors

Fifty-five-year-olds are almost twice as likely as 65- and 75-year-olds to rely on “do-it-yourself” employer-sponsored plans like 401(k)s to fund their retirement amid the broader decline of defined benefit pension plans that supported previous generations, according to Prudential Financial Inc.’s “2024 Pulse of the American Retiree Survey.” 

“It’s very important to budget both today to see how much you can afford to contribute to 401(k)s and other retirement accounts,” says Brandon Goldstein, a financial planner at Prudential Advisors. “And consider what expenses you might need in your ideal retirement scenario. Make sure to budget for inflation in the future.” 

Without a traditional pension plan, people will have to “self-fund” and create their own income streams, Goldstein adds. The demise of traditional pension plans has led to more income-based annuity products and dividend-paying stocks and bonds strategies to supplement social security.  

“My advice is to sit down with a planner, go through your budget, and come up with an income goal in retirement and roadmap to get you there,” he says. 

Prudential found that the median retirement savings of individuals aged 55 were less than $50,000, considerably less than the eight times annual income goal that is advised for this age group. According to the findings, 59% of 65-year-olds and 52% of 75-year-olds are worried about outliving their funds, which is certainly an issue, but still lower than the 67% of 55-year-olds, according to the insurer. 

The current market environment is further exacerbating savers’ concerns. Due to inflation and rising living expenses, 43% of 65-year-olds and one-third of 55-year-olds have put off retirement. In addition, 19% of 65-year-olds, 15% of 75-year-olds and more than one-third (35%) of 55-year-olds said they would find it difficult to save $400 in a month to pay an emergency bill. 

On a 10-point scale, people who were 55 years old were the least satisfied with their lives overall, not just financially, scoring only 6.2. 65-year-olds (7.0) and 75-year-olds (7.4) reported higher levels of life satisfaction. Individuals aged 55 who did not have financial stability were notably more likely to have mental health difficulties (53%) in contrast to those who were financially secure (33%). 

“America’s 55-year-olds have the opportunity to reimagine and protect retirement outcomes with a new set of tools that can help them safely grow their retirement nest egg while also ensuring a reliable stream of lifetime income,” said Dylan Tyson, president of retirement strategies at Prudential, in a statement. “With the retirement model evolving beyond traditional pensions, lump sums and Social Security, it is critical that we work together to prepare for better and longer lives throughout retirement.” 

Only 6% of 55-year-olds plan to use annuities in retirement, compared to 11% of 65-year-olds and 20% of 75-year-olds, amid the industry’s growing push for lifelong income solutions to retirement security.  

Nonetheless, 71% of people over 55 say they are considering annuities, offering the industry “significant opportunity” to improve retirement security through secured income options, Prudential stated. 

Brunswick Group conducted the survey from April 26 to May 2, polling a national sample of 905 Americans who were 55, 65, and 75 years old.