Older Workers More Anxious Than Retirees About Financial Future

Despite having significant nest eggs, pre-retirees more likely to fear financial struggles in retirement

Pre-retirees are more likely than retirees to worry about running out of money or not affording health care. Pre-retirees are more likely than retirees to worry about running out of money or not affording health care.

Workers on the cusp of retirement are more anxious than recent retirees despite both groups having significant assets in 401(k)s, says a new survey from T. Rowe Price.

Meanwhile, the survey — which focused on new retirees who have 401(k) account balances or rollover IRAs and workers age 50 and older who are 401(k) participants — found that many recent retirees have accumulated significant nest eggs and are faring well, both financially and emotionally.

According to the survey, a greater percentage of workers believe that they will have to reduce their standard of living compared with the retirees (49% vs. 35%). More workers also believe that they will run out of money (22% vs. 14% of retirees), and they are less likely to believe that they will have enough money to pay for health care (49% vs. 70% of retirees).

“For workers approaching retirement, we know there is anxiety and uncertainty as they look ahead and think they can't possibly be prepared for retirement. But this study demonstrates that you can do it,” said Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services, Inc., in a press release. “Many people are successfully saving in the private retirement system, and they report that post transition, they are fine.”

In fact, 89% of the recent retirees surveyed said they feel somewhat or very satisfied with retirement so far and 74% of recent retirees said “they are somewhat or much better off financially compared with how their parents lived when they were their age.”

“We have an opportunity to share these positive stories with 401(k) savers,” DeCamillo said in a press release. “We also need to emphasize the important role Social Security plays as the foundation of retirement income for most American households and the strategic advantages of delaying Social Security benefits.”

Among retirees, the study found that Social Security accounted for the largest portion of a income, with 43% coming from Social Security, 19% from traditional defined benefit plans, and 18% from personal savings and investment accounts, including IRAs and defined contribution plans.

Of the yet-to-be-retired crowd, the majority of the workers have decided Social Security can be delayed. According to the survey, 80% indicated their intent to wait until at least their full retirement age (66) to begin collecting Social Security benefits and 34% said they would be willing to take the maximum benefit at age 70. Only 20% of the workers surveyed said they would collect Social Security benefits as soon as they become eligible (age 62).

The recent retirees surveyed reported median household assets of $473,000, with 48% of those surveyed reporting $500,000 or more in household assets. Of their investable assets, 38% was in stocks and stock mutual funds, 13% was in asset allocation mutual funds and 31% was held in cash. More than eight in 10 of the retirees own real estate with a median of $191,000 in home equity.

Those not yet retired, despite their anxiety, also reported having considerable savings.

Among workers 50 and older, those surveyed reported accumulated median household assets of $465,000. But the survey did find that they are invested less conservatively than their retired counterparts, with 47% of their investable assets in stocks or stock mutual funds, 13% in asset allocation funds and 23% in cash. Of the workers, 81% own real estate, with a median of $171,000 in home equity.

Workers said the minimum they would like to save is $693,000 before they retire and 61% are confident that they will hit that number, which isn’t surprising given that many said they expect to work longer and have considered delaying retirement.  On average, they expect to retire at age 68 and 43% reported that they have considered delaying retirement in the last 12 months.

The survey is based on a national sample of 1,507 retirees who have been in retirement for one to five years and have a rollover IRA or an account balance in their 401(k) plan. It also includes a second sample of 1,030 workers, age 50 and older, who are currently contributing to a 401(k) plan or are eligible to contribute and have a balance of at least $1,000. 

 

---

Related on ThinkAdvisor:

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.

Related

The Retirement Apocalypse That Isn’t Coming

Fears of a looming retirement crisis are overblown, Ben Steverman says in the blog Ventured & Gained.