Published: December 08, 2010
Working in Retirement is the New Normal for Middle Class Americans, Wells Fargo Retirement Survey Finds
CHARLOTTE, N.C. - (BUSINESS WIRE) - For middle-class Americans, retirement simply means a new phase of their
working years, according to results from the sixth annual Retirement
Fitness Survey from Wells Fargo & Company (NYSE:WFC). The survey found
that 72% of middle-class Americans between the ages of 25 and 69 expect
to work through their retirement years. The trend is driven both by deep
deficits in personal retirement savings - 39% say they "will need to
work" to make ends meet or maintain their lifestyles - and also by
lifestyle choice, with 33% saying they will continue to work because
they want to.
Middle-class Americans, especially those under 50, increasingly know
that retirement is a do-it-yourself endeavor. Only two in five (40%) of
those surveyed said they think Social Security will be available
throughout their retirement - including only 20% of 20-somethings and
22% of 30-somethings. All five generations surveyed voiced strong
support for changes in 401(k) plan design and regulation that would
enable more guidance and advice to help people to save more.
While many Americans express worry about their retirement prospects,
judging from their finances they probably aren't worried enough.
Respondents predict they will need a nest egg of $300,000, but have
saved just $20,000 of that amount for retirement (figures throughout are
medians, the midpoint of responses). They expect to live on retirement
savings for nearly two decades (19 years), while planning to spend 10%
of their nest egg every year. The industry recommendation is to withdraw
no more than 4% annually.
The median retirement savings of respondents age 50 to 59 is $29,000.
Stretched out to fund a retirement of 20 years, these savings would
amount to about $190 a month (assuming a 5% rate of return). Yet, 56% of
the 50-somethings say they are "confident or very confident" they'll
have the money they need to support their desired lifestyle throughout
retirement.
"Too many Americans have their heads in the sand in the face of obvious
savings deficits," said Laurie Nordquist, director of Wells Fargo
Institutional Retirement and Trust. "People are not even close to where
they need to be in total savings. Barring a miracle, a winning lottery
ticket or a big inheritance, they're going to be forced to dramatically
cut back their lifestyles after retirement."
However, Nordquist noted, there is one bright spot. "Americans seem to
get that retirement planning is now in their hands, which is a start in
terms of taking control," she said.
On behalf of Wells Fargo, Harris Interactive Inc. conducted 1,756
telephone interviews of middle income Americans in their 20s, 30s, 40s,
50s and 60s, surveying attitudes and behaviors around planning, saving
and investing for retirement. The interviews were conducted between
September 9, 2010 and October 7, 2010.
Other top findings include:
-
20-somethings are the least confident about investing in the stock
market, and are most likely to put their savings in a bank CD rather
than invest in stocks.
-
40-somethings are under the most financial stress of any age group.
They are dramatically less likely to have pensions than older workers,
and economic strains are most likely to be causing tension in their
households. 80% of them expect to work through retirement, vs. 54% of
60-somethings.
-
Those surveyed expressed strong support for reforms that would
encourage additional saving. Respondents overwhelmingly (79%) want
employers to offer more advice to help manage their retirement plans -
guidance that is difficult for employers to provide under current
regulations.
-
Only a third (33%) of those surveyed have a detailed written
retirement plan.
-
Compared with Americans who are married or partnered, single Americans
are more confident in the future of Social Security and expect to
spend less on healthcare during retirement.
-
Two thirds (65%) believe they should be saving more and could be if
they got more guidance or advice.
Generational Shift: Dramatic Drop in Pensions
"People in their 50s and 60s are the last generations that can depend on
traditional pensions, and their confidence level as they approach
retirement reflects that," said Joe Ready, director of Wells Fargo
Institutional Retirement and Trust. "In the younger age groups, we're
seeing that individual savings efforts, whether through 401(k)s or IRAs,
are much more important than to older generations, most likely
reflecting the reality that they know they are responsible for their own
retirement."
The survey found significant differences between age groups, both in
attitude and in degree of financial preparedness.
-
20-Somethings: Once Bitten, Twice Shy on Stocks - 20-somethings
are the most confident when it comes to feeling they are "on track for
retirement" (71%). However, they have the lowest level of confidence
among all of the age groups about the stock market as a place for
investment gains (31% are confident vs. 40% of 40-somethings), and
would be the most likely to put their savings in a bank certificate of
deposit rather than invest in the market (40% vs. 29% of
40-somethings) if given $5,000 to invest for retirement. This could
threaten to compound the damage that the economic downturn has done to
their economic future. Not only are they entering the weakest job
market in years, they're putting their money in safe investments with
the least chance of long-term appreciation.
-
30-Somethings: Sandwiched in the Middle - Perhaps reflecting
their status as a sandwich generation, needing to support their
children and their parents, 30-somethings are most likely (33%) to say
that the needs of parents, children, or other family members will
affect their retirement plans. They also anticipate the highest health
care costs in retirement.
-
40-Somethings: Under Stress - 40-somethings are the most
stressed about retirement. They are the least likely of any group
(48%) to express confidence in their ability to save enough to live
the retirement they want, while 60% say they don't have extra money to
save for retirement. They also have the highest proportion of all
groups who think inflation (47%) will impact their ability to retire
and are the generation most likely to be reducing debt (79%). And they
are by far the most likely to say that money matters have increased
the tension in their households since the economic downturn (61%, vs.
39% for 60-somethings).
-
50- and 60-Somethings: Excited - People in their 50s and 60s
are the most likely to be excited and looking forward to retirement,
and are the most confident in continued availability of Social
Security. They are also the most likely to expect pensions as a source
of retirement income (59% of 60-somethings and 55% of 50-somethings
have pensions, vs. 36% of 40-somethings, 32% of 30-somethings and 27%
of 20-somethings).
Strong Support for Retirement Reforms
Respondents expressed strong support for a number of measures that would
enable and encourage additional saving. Asked whether employers should
provide more personal advice services to help employees manage their
401(k)s, 79% of respondents agreed. A similar number (82%) agreed
employees should be offered a lifetime income option in their retirement
accounts, which could be more prevalent with clearer regulatory
guidelines.
Two-thirds (65%) expressed agreement that, for those without access to a
401(k) or similar plan, an equivalent system should be created. Of those
with a 401(k) and company matching contribution, 85% said they
contributed as much as their company will match, suggesting this is an
effective incentive.
Impact of the Recession
When asked about the impact of the recession on their financial
management and retirement expectations, respondents reported that:
-
71% are actively working to reduce debt.
-
Two-thirds (65%) of people say they're not very confident or not at
all confident that the stock market is a place for investment gains
for their savings.
-
55% say they have other financial priorities and don't have extra
money to save.
-
One-third are worried about a job loss in their household in the
coming year. Forty-somethings (43%) and fifty-somethings (42%) are
most worried about this.
-
People making $75,000 to $100,000 a year have outsaved those making
$100,000 and up, with a median of $99,000 in total investable assets,
vs. $59,000 saved by those making $100,000 and up.
What, Me Worry?
The survey found that only 33% have a detailed written retirement plan.
A similar number (37%) don't know how much they'll need and/or can't
estimate how long they'll be able to live on what they have saved. Yet
more than half (58%) are confident that they'll be able to retire
comfortably. Almost two-thirds (62%) say they have not changed their
retirement savings rates in the two years since the recession began and
only 16% have increased it.
Healthcare Tops List of Concerns
Survey respondents said their fear of healthcare costs using up their
retirement savings outweighs their fear of market volatility. Close to
half (47%) said healthcare costs would have a high impact on their
ability to retire, compared to 37% citing inflation and 28% citing
volatility of savings/investment returns.
-
Respondents say they anticipate spending a median of $32,000 on
post-retirement healthcare costs, which would consume more than the
entire $20,000 they have currently earmarked as retirement savings.
-
More than four in ten respondents (44%) expect health care will cost
them more than $50,000 in out-of-pocket costs during retirement.
Single Americans More Confident
Compared with Americans who are married or partnered, single Americans:
-
Are more likely to be "very confident" of having enough to retire on
comfortably (25% among unmarrieds vs. 17% among marrieds).
-
Are more likely to believe Social Security will be available to them
during their entire retirement (47% vs. 37%).
-
Expect to spend less on healthcare after retirement ($24,000 vs.
$36,000).
-
Are contributing more to their 401(k) or similar plans (9.7% of annual
income for unmarrieds vs. 8.0% for marrieds).
-
Are less likely to be contributing to an IRA (23% vs. 30%) or to say
they can depend on their brokerage accounts as a source for retirement
income (47% vs. 55%), but are more likely to have or expect a pension
(55% vs. 41%).
Easterners Save Less, Worry More
-
Easterners are most likely (23%) to say the inability to meet
day-to-day expenses will have a high impact on their ability to
retire, vs. 20% in the Midwest, 15% in the South and 12% in the West.
-
Only 10% of Easterners say they have increased their rate of
retirement savings in the past two years, vs. 19% of Westerners and
Southerners.
-
Westerners are most likely (37%) to have cut back on discretionary
spending due to the recession; Southerners the least likely (27%).
-
Southerners are least concerned that they or a household member will
lose their job in the next year: 70% of Southerners were not
concerned, vs. 61% of Easterners.
-
Midwesterners are the most skeptical about the future of Social
Security, with only 35% believing it will be available to them during
their entire retirement, vs. 44% of Westerners.
Members of the media can obtain a full study by contacting Amy Hyland
Jones at (704) 383-4995.
For help understanding how to prepare for and live in retirement, visit
Wells Fargo's retirement site at https://www.wellsfargo.com/investing/retirement/.
About the Survey
On behalf of Wells Fargo, Harris Interactive Inc. conducted 1,756
telephone interviews of middle class Americans in their 20s, 30s, 40s,
50s and 60s, surveying attitudes and behaviors around planning, saving
and investing for retirement. To target the middle class, the survey
included only respondents who fell within specified income and wealth
brackets. Those aged 25 to 29 had household income of $25,000 to $99,999
or investable assets of $25,000 to $99,999. Those aged 30 to 69 had
household income of $40,000 to $99,999 or investable assets of $25,000
to $99,999. The lower income limit for 20-somethings was used to reflect
the early stage of their careers. For the 20s age group, only
respondents aged 25 to 29 were included in order to focus on workers.
Data were weighted as needed to represent the population of those
meeting the qualification criteria. Figures for education, age, gender,
race/ethnicity, region, household income, investable assets, number of
adults in the household, and number of phone lines (to adjust for
probability of selection) were weighted where necessary to bring them in
line with their actual proportions in the population.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.2 trillion in assets.
Founded in 1852 and headquartered in San Francisco, Wells Fargo provides
banking, insurance, investments, mortgage, and consumer and commercial
finance through more than 9,000 stores, 12,000 ATMs, the Internet
(wellsfargo.com and wachovia.com), and other distribution channels
across North America and internationally. With more than 278,000 team
members, Wells Fargo serves one in three households in America. Wells
Fargo & Company was ranked #19 on Fortune's 2009 rankings of
America's largest corporations. Wells Fargo's vision is to satisfy all
our customers' financial needs and help them succeed financially.
About Harris Interactive
Harris Interactive is a global leader in custom market research. With a
long and rich history in multimodal research that is powered by our
science and technology, we assist clients in achieving business results.
Harris Interactive serves clients globally through our North American,
European and Asian offices and a network of independent market research
firms. For more information, please visit www.harrisinteractive.com.
Wells Fargo
Amy Hyland Jones, 704-383-4995 (Media)
Leslie
Ingberg, 612-667-0265 (Media)
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