While researchers generally suggest that people will need about 10 times their annual salary saved in order to successfully navigate retirement, 56% of working Americans say they expect to need at least 30 times their annual working income put away to fund life after work.
This is one of the topline findings of a recent report published by Principal. Other highlights show saving for retirement is the top financial priority for Americans, with 88% actively building their retirement nest eggs.
The vast majority (89%) of those saving for retirement say they are using their employer’s retirement plan to save. Additionally, 58% of Americans surveyed are committing at least 9% of their annual income toward retirement.
Despite this broad commitment to savings, 34% report feeling behind on their retirement goals. About the same proportion (32%) feels uncertain that they will maintain their standard of living after leaving the workforce.
Income Outlook
Chris Littlefield, president of retirement and income solutions at Principal, said in a statement that retirement savers were "socking away money at a robust rate" in 2024 despite headwinds from inflation and interest rates.
“However," he added, "the same Americans who are showing strong savings behaviors and momentum also lack confidence in their retirement readiness.”
As noted, well over half of employees surveyed believe that they should have at least 30 times their annual salary saved by age 65 to live comfortably in retirement, although 10 times may be sufficient when factoring in Social Security and market returns.
Additionally, 54% think that they can safely withdraw 10% or more of their retirement savings annually without outliving their nest eggs — despite expert recommendations in the realm of 4% to 6%.
Big Knowledge Gap
The Principal research shows that, while there is a knowledge gap around best practices for saving and planning for income in retirement, 66% of workers recognize that they need help. Likewise, 72% of employees are comfortable getting retirement savings help from a financial professional, and 62% are comfortable receiving support from their employer.
The benefits of increased participation and engagement can be significant, according to Principal, considering that about 8 out of 10 people say that financial professionals provide confidence that they’ve made the right decisions.
“People are seeking more comprehensive help and advice as they plan for retirement, which is increasing the importance of taking a holistic view of their needs in retirement beyond just the amount they need to save,” Littlefield said.
Broader Business Outlook
Barring an unexpected change in direction for the U.S. economy, workers should be able to continue their strong commitment to retirement savings in 2025.
According to Principal’s survey, the landscape for small to mid-sized businesses is softening from record hiring and growth in the first half of 2024, but a sense of cautious optimism remains, leading to stable staffing expectations among business leaders.
Recent survey data from the Principal Financial Well-Being Index, for example, shows that 64% of business owners are balancing optimism about their own 12-month outlooks with declining confidence in the U.S. economy (14-point decrease) and their local economies (12-point decrease) since July.
Inflation remains the top concern for employers and employees, according to the survey, with findings showing that both groups continue to feel pinched. Notably, only 44% of employees report that their wages are keeping up with inflation. At the same time, the outlook for hiring and retention has softened. Employer concerns about employee retention fell from 46% in July to 32% in November, while concerns about attracting talent dropped from 39% to 33%.
“We’ve seen ongoing small-business growth, reaching post-pandemic highs in 2024,” observed Amy Friedrich, president of benefits and protection at Principal. “While we expect to see that growth continue, we could see a slowdown as business owners continue to battle inflation.”
Friedrich said it will be critical for small and midsize business owners to monitor new economic policies — particularly those with tax implications — along with changes in credit and lending markets. Doing so will help them adjust to do what’s right for their employees, customers and the health of their business.
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