How realistic are employees about the true state of their retirement savings? While many among the three primary generations that make up today’s workforce are feeling pretty good about the future, all three may be seeing things a little optimistically. Even if their vision is a little rosy, there are things employers can do that may make a difference in retirement savings for Millennials, Generation Xers, and Baby Boomers alike. Recently, Natixis Investment Managers checked in on about 1,000 U.S. workers spread across the three generations to find out how they are feeling about their savings habits and their future financial prospects. These workers were also asked what incentives would help them start saving, or to save more.
A quick summary, by generation:
Millennials, the eldest of whom are now 38 and the youngest 23, have a great start on saving for the future. Forty-three percent of them express cautious optimism about being comfortable in retirement, although they admit they will need to be careful with their money. On average, Millennials began saving at age 25, and have saved about $80,000 already. They estimate they will need a little over $980,000 to fund retirement, a figure the report says is a little low. And they should factor in their targeted retirement age of 61 to make sure their savings last long enough. Many among this group have already taken money out of their plan balances: 30% have taken a loan, and 26% took a withdrawal.
Generation X is more financially worried than their younger coworkers. This group now ranges from 39-54, and just 18% of them believe they will have saved enough money to fund the retirement they want. Almost one-quarter (23%) of them believe they will never be able to retire. This group appreciates auto-escalation in their 401(k) plans, taking advantage of it at higher rates than their older and younger coworkers do. But, their belief that they will need $988,000 to retire is likely too low, especially considering they have fewer years to increase their current average savings of a little over $166,000.
Baby Boomers have a more realistic retirement savings goal, at $1,018,488 — but they have much less time to reach it from their current point of under $307,000. Currently 55 to 73 years old, their average contribution rate is 8.5%, and they are targeting, on average, a retirement age of 69. It will take about $142,000 in annual savings to reach their goal, on average.
Among the 1,000 people participating in the 2019 Defined Contribution Plan Participant Survey, 700 participated in the plan available to them. When asked why they aren’t saving more, daily expenses were cited by 65% as the major barrier, followed by general debt at 43%. One sobering response to the question was “I’d rather spend money to enjoy life now,” cited by 25%.
Of the 300 respondents who are not participating in their available plan, about one- third said their employer doesn’t offer a match or that the match isn’t enough. The match seems to be an important factor for those who are participating, too. Overall, 56% of respondents report that their employer’s matching contribution is the top reason they are saving in the plan.
Learn more about the actions employers can take that employees say would encourage them to join the plan or save more by viewing the full report at https://tinyurl.com/Natixis-2019-DC.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advisory services offered through LMC Financial Advisors, a registered investment advisor. LMC Financial Advisors and LPL Financial are separate non-affiliated entities.
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
© 2019 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.