We all know that saving for retirement is important. As a society, we are living longer than we expected, and this sometimes means that we did not save enough during our working years. Living longer lives is of course a wonderful thing, but it also means that nearly everyone has an opinion on how much to save, through what vehicles, the role of government and more.
There are a lot of perspectives about the possibility of a retirement crisis — the Federal Reserve Bank of St. Louis has noted that “for many American households, the total balances of their retirement accounts may not be sufficient to ensure a solid life in retirement.” So, let’s focus on a few observations that we are seeing in the retirement services industry and what this might mean for the future.
First, the truth is that each generation in America is living longer than the previous one. Yet ever since Social Security was enacted more than 80 years ago, the minimum age for collecting full benefits has only slightly increased (from 65 to 67 for anyone born in 1960 or after). While this does not mean that everyone has to retire at this age, it does serve as a guideline for when people may expect to retire. The thinking used to be that you worked all the way up until the last few years of your life; the common thinking now is to enjoy your retirement lifestyle for a couple of decades.
There’s no reason not to expect this trend to continue, and so it’s worth thinking about how the generations who are in their prime working years are preparing for the years ahead. Is the expectation for a long and enjoyable retirement translating to better savings habits?
Research suggests that it is. When we polled small businesses and employees last year in our inaugural Small Business Retirement Survey, we found that millennials, who now comprise the largest generation in today’s workforce, take retirement benefits very seriously. We found that 91% of millennials surveyed view retirement savings options as an important factor when considering a new employer. Additionally, 95% of this age group wants to be educated on how to manage their retirement savings goals.