People are growing more concerned about the state of their retirement savings however fewer are taking concrete steps to address those concerns than in previous years.
Forty-one percent of respondents to Franklin Templeton’s 2016 Retirement Income Strategies and Expectations (RISE) survey said they have not begun saving for retirement, up from 35 percent in 2014. Meanwhile, 70 percent of respondents reported feeling stress about their retirement savings situation compared with 67 percent in 2015.
More than half of respondents are more concerned today about outliving their assets or having to make major sacrifices during retirement. A year ago, only 43 percent were concerned about this possibility.
While both Gen Xers and millennials reported anxiety about retirement, millennials tended to have a more optimistic outlook. Thirty-five percent of millennials believe their retirement will be better than previous generations. Only 26 percent of Gen Xers had a similar positive outlook. Gen Xers and millennials were the most concerned about being able to pay for expenses in retirement (89 and 90 percent, respectively).
A lack of fundamental understanding about retirement costs could contribute to anxiety levels, said Franklin Templeton. Of those respondents who reported experiencing significant stress when thinking about their retirement savings, 65 percent indicated they did not have an understanding of how much they should expect to spend on an annual basis during retirement. Similarly, 60 percent of those who were concerned about managing retirement income do not know how they will pay their medical expenses during retirement.
The ability to pay for health care costs is the topic of greatest concern among respondents, with 39 percent of both baby boomers and Gen Xers expressing concerns about health care costs.
One-quarter of respondents said their retirement strategy is complete, but Franklin Templeton’s study revealed generational differences in levels of preparation. Fifty-one percent of Gen Xers called their retirement income strategy inadequate, and 40 percent of millennials said they have no retirement strategy at all.
Household composition played a role in confidence as well. Only 15 percent of households with children under 18 felt their retirement income strategy was complete, compared with 29 percent of those with no children. Those with minor children also indicated they may consider delaying retirement due to insufficient income.
“Our annual RISE survey consistently underscores the importance of creating a retirement income strategy to not only help meet long-term savings goals, but also reduce stress and anxiety surrounding retirement planning,” said Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments. “That being said, retirement planning strategies are not one-size-fits-all, a fact that this year’s data certainly reinforces. Needs, expectations and concerns can vary widely depending on a variety of factors — such as age and lifestyle considerations — all of which can play a key role in the development and implementation of a successful retirement income strategy.”