Close to half (45 percent) of baby boomer workers are expecting a decrease in their standard of living when they retire, according to new research.
The Transamerica Center for Retirement Studies (TCRS) unveils this finding in a new report evaluating the retirement outlook of American workers by generation. The 17th annual Transamerica online survey, “Perspectives on Retirement: Baby Boomers, Generation X, and Millennials,” conducted by Harris Poll, polled 4,161 full-time and part-time workers, including 1,353 millennials, 1,232 generation Xers, 1,462 baby boomers and 114 workers who were born prior to 1946.
“Today’s workers are grappling with retirement security and challenged by the wobbly three-legged stool comprising Social Security, employer-sponsored retirement benefits and personal savings,” says TCRS President Catherine Collinson.
The survey finds that among the generations surveyed, 83 percent of Generation X workers believe that their generation will have a harder time achieving financial security than their parents’ generation. And among Millennial workers, the youngest generation in the workforce, only 18 percent are very confident about their future retirement.
“Although the Great Recession ended years ago, millions of Americans are still regaining their financial footing,” says Collinson. “As each year passes, people’s fears about our current retirement system come more sharply into focus.”
Key findings from the survey raise questions about the stability of the U.S. retirement system’s three-legged stool:
Sixty-one percent of workers have not fully recovered from the Great Recession, including 41 percent who have somewhat recovered, 13 percent who have not yet begun to recover, and seven percent who may never recover;
Seventy-seven percent of workers are concerned Social Security won’t be there when they are ready to retire;
Only 51 percent of workers agree that they are building a large enough retirement nest egg, including only 16 percent who strongly agree; and
Sixty-five percent believe they could work until age 65 and not save enough to meet their needs.
“Amid retirement savings shortfalls, American workers are attempting to prop up our system’s three-legged stool by adding a fourth leg: working during retirement,” says Collinson.
The survey finds that 38 percent of workers are expecting income from continued work during their retirement. And 15 percent are expecting it to be their primary source of income in retirement.
Baby boomers (born 1946 to 1964): trailblazers of the new retirement
“Baby boomers are the generation that has re-written societal rules at every stage of their life,” says Collinson. “Now, baby boomer workers are redefining retirement by planning to work until an older age than previous generations.”
Sixty-six percent plan to or already are working past age 65 or do not plan to retire. Many also expect to continue working in retirement, at least on a part-time basis.
Most of those who plan to continue working say it’s due to income or health benefits. However, boomers’ vision of a flexible transition into retirement may prove difficult because many employers do not have business practices in place to accommodate a flexible transition into retirement.
Most baby boomers (87 percent) are expecting Social Security to be a source of their retirement income and one in three (34 percent) expects it to be their primary source of income. One-third (33 percent) are expecting income from a traditional pension plan, while most (78 percent) from retirement accounts (e.g., 401(k)s, 403(b)s, IRAs) and other savings and investments.
The current household savings in all retirement accounts among boomer workers is $147,000 (estimated median). Many boomers were already mid-career when 401(k) plans were first introduced. Therefore, they have not had a full 40-year time horizon to save in 401(k) plans.
“Working longer and fully retiring at an older age is a common sense solution for mitigating retirement savings shortfalls. Baby Boomers’ vision can only be achieved if they are proactive about staying employable and if employment opportunities are available to them,” says Collinson. “As part of their retirement planning, baby boomers should create a Plan B if retirement happens unexpectedly due to job loss, health issues, or other intervening circumstances.”
Generation X (born 1964 to 1978): The struggling retirement savers
“Generation X entered the workforce in the late 1980s and is the first generation to have access to 401(k) plans for the majority of their working careers,” says Collinson. “As such, they are early adapters who had to learn from their own experience without precedents to help guide their way.”
Seventy-seven percent of Generation X workers are saving for retirement and they started at age 28 (median). Among those participating in a 401(k) or similar plan, they contribute seven percent (median) of their annual pay.