Retirement today is not your grandparents’ retirement, or even your parents’. It is likely to last longer and be more active, putting a big premium on preparedness.
The sixth annual Aegon Retirement Readiness Report finds that American workers rank second in retirement preparedness among 15 countries.
U.S. workers exhibited a medium level of readiness, scoring 6.9 out of 10 on the latest Aegon Retirement Readiness Index, which measures six behavioral and attitudinal factors. India proved readier with a score of 7.6.
The report — a collaboration among Transamerica Center for Retirement Studies, the Aegon Center for Longevity and Retirement and Mongeral Aegon Instituto de Longevidade — focused on responses from 900 U.S. workers and 100 retirees. It was part of a larger set of interviews conducted in 15 countries spanning Europe, Asia, Australia and the Americas.
The survey found that American workers and retirees will continue to rely on government for 42% of their income in retirement, with the remainder equally split between their personal savings and employer workplace programs.
Fifty-seven percent of U.S. workers said they always made sure they were saving for retirement, compared with just 39% of workers globally.
The survey showed that habitual savers have a brighter retirement outlook compared with occasional savers:
Aware of the need to plan financially for retirement: 89% vs. 79%
Know the value of their personal savings in retirement: 80% vs. 57%
More confident they will enjoy a comfortable retirement: 56% vs. 38%
Some three-quarters of U.S. workers in the survey had a retirement strategy, compared with fewer than two-thirds of workers globally.
(Many other countries, though, rely less on workers to manage their own “strategies.”)
Thirty-two percent had a written strategy in place, compared with 14% globally, and 41% have a non-written one. Millennials were most likely to number among the strategists.
A quarter of American workers did not have a retirement strategy; these were most likely to be women and those with low incomes.
The survey found strategists were much likelier that non-strategists to be aware of the need to plan financially for and to save habitually for retirement. As well, three-quarters of those with a written strategy felt confident about achieving a comfortable retirement, compared with 39% of those with a non-written strategy and just 14% of those with no strategy.
Eighty-seven percent of Americans in the survey said their health was excellent or good, compared with 67% globally, while 13% said it was fair or poor. The percentage of those in excellent health gradually declined from 59% of millennials to 11% of those 65 and older.
Workers in excellent health were better positioned to be ready for retirement than those in good or fair health. Their score on the Aegon index was 8.0, compared with 6.6 for those in good health and 5.8 among those in fair health.
Respondents in excellent health said they expected to retire at age 60 and to live for two decades in retirement. Workers in good health expected to retire at 66 and live on for 20 years, while those in fair health said they would work until 67 and spend just 15 years in retirement.
Half of U.S. workers, compared with 43% of workers globally, said health in older age was a primary concern, something they regularly considered and were proactively seeking to improve.
Forty percent of the American contingent said they sometimes considered health in older age, but prioritized other things, such as having enough income in retirement.
Generally in line with the global average, three out of five American respondents said they took day-to-day meausres to maintain their health, including healthful eating, regular exercise and avoidance of harmful behavior such as smoking and excessive drinking.
Beyond those things, half of respondents said they were taking strategic measures, such as trying to avoid stress, having regular medical checkups and regularly checking themselves.
Only 47% of U.S. workers said they had backup plans if they should become unable to work because of health or job loss. The report said these measures could prove inadequate.
Respondents most often said they would tap their savings, but that source could quickly dry up. Some said they would rely on a partner’s income, but in a household that needed a double income, that could prove inadequate. Others said they would take early withdrawals from retirement savings accounts — shifting the income shortfall into retirement.
The survey found that products designed specifically to address forced early withdrawal from work, such as disability insurance and critical health insurance, were vastly underused.
Only 30% of American workers said they expected to stop working as soon as they reached retirement age. A third expected to work part time or on temporary contracts before eventually withdrawing from the workplace.
One in five workers said they expected to continue working in some reduced capacity throughout retirement, while a tenth said they would continue working at the same capacity.
Two-thirds of respondents reported that their employers offered the ability to work past normal retirement age, but only about a third said they were offered phased retirement or other programs that provided for a transition into retirement.
— Check out 5 Best Countries for Affordable Health Care in Retirement on ThinkAdvisor.