More American workers have increased their retirement savings this year, according to a new study by Bankrate.com.
As many as 21% of people surveyed are saving more for retirement than last year, a new record-high percentage in Bankrate’s Financial Security Index. The study also finds that fewer people are choosing not to save anything for retirement. Just 5% didn’t contribute to retirement savings this year, a new low for the survey.
Another new high this year was the amount of Americans who are saving the same amount for retirement as last year (56% of those surveyed).
Greg McBride, Bankrate.com’s chief financial analyst, says he sees these results as a sign of an improving economy.
“Both readings are indicative of an improving economy, where people are earning more and saving more,” McBride said in a statement.
In 2011, those saving less outnumbered those saving more by nearly 2 to 1, (29% vs. 15%). This year, those saving more than last year (21%) outnumber those saving less (17%).
Bankrate attributes the boost in savings to the changing retirement savings environment, including the disappearance of pension plans and the increase in automatic enrollment in 401(k)s.
According to Alan MacEachin, corporate economist with Navy Federal Credit Union, the “ongoing disappearance of traditional pension plans, and the precarious financial position of many of the remaining ones, puts the onus on individuals to save more.”
Adam Millsap, a research fellow with the Mercatus Center at George Mason University, tells Bankrate that automatic enrollment in 401(k)s have grown in popularity, which boosts savings.
“Auto enrollment has been shown to increase the proportion of people who save,” Millsap says.
Younger Generations Are Saving More
Bankrate’s survey also examines which age groups are leading the way in saving more now than last year for their retirement. This year’s survey finds that Generation Xers (ages 36 to 51) led the pack at 26%, followed by younger millennials (ages 18-25) at 22%.
Sam Rines, senior economist at Avalon Advisors LLC, tells Bankrate that younger generations are “likely saving more because they’re near the beginning of their life cycle and need to save more to reach their retirement objectives.”
“The older generations have already done the majority of the saving they will do, and may see little point in putting additional dollars away at such low return levels,” Rines said in a statement.
Meanwhile, Bankrate found that the Americans who were saving less were those in the silent generation (age 71 and older) followed by younger baby boomers (age 52 to 61).
According to Bankrate’s McBride, this is not a good sign.
“Younger baby boomers saving less for retirement than last year is troubling because they’re more likely in their peak earning years and should be utilizing higher catch-up contribution limits to get on track for retirement,” McBride said in a statement. “Those in the silent generation who are saving less may be a function of earning less as they phase into retirement.”
For this year’s Bankrate survey, Princeton Survey Research Associates International conducted telephone interviews from Aug. 4 to 7with a nationally representative sample of 1,000 adults living in the continental United States.
— Check out Why Aren’t Retirement Savers Choosing Annuities? on ThinkAdvisor.