The vast majority of workers dream of one day retiring with enough money put away to live out their golden years in style. But for some, a comfortable retirement is just that — a dream.
A survey released this week by financial services firm Principal paints a grim picture of U.S. employees' retirement outlook. Principal found that although 71% of workers said they had a top life goal of retiring comfortably, less than half (49%) were confident they’d have enough of a financial cushion to do so.
The report, which included responses from about 2,000 Americans across generations, also quizzed nearly 250 retirement plan providers. They had an even harsher view of the situation: Just under 40% reported that workers in their plans were doing a good job preparing for retirement, and only 15% said they believed their participants would have enough money to live comfortably in retirement.
While the lack of confidence may be new, the end goal isn't.
“Time and again, Americans overwhelmingly say they want a comfortable retirement, and shifts in the past few years about how we work and think about work has not changed that,” Sri Reddy, a senior vice president at Principal, said in a statement.
What is changing is the attainability of a comfortable retirement.
The new retirement plan? Never-ending work
In decades past, the timing of a person's retirement was largely determined by their eligibility to collect Social Security, pension or other benefits — that is, their age. However, Principal’s research suggests that dynamic is starting to shift amid growing uncertainty from workers that Social Security will be able to support them in retirement, plus a decline in employer-sponsored retirement benefits.
Instead of easing into retirement at 60-something and living off their pension and Social Security benefits, workers these days increasingly expect to continue working indefinitely. Some 80% of workers told Principal they planned to keep working throughout retirement.
These expectations were due, in part, to the cost of health care in retirement as well as the unpredictability of Social Security benefits and other retirement-related policies. And that's on top of concerns around not having enough money saved and, of course, inflation.
Of those factors, health care costs and inflation could have a major compounding effect for retirees. A separate study recently released by HealthView Services found that today’s record-setting inflation will result in increased health care costs for the long haul, posing further financial risks for retirees. For example, the additional lifetime costs due to health care inflation for a 45-year-old couple would amount to $259,808, the study found.
This emerging retirement crisis is becoming clear to workers and employers alike. Amid a historically tight labor market, wages have been getting a lot of attention, but workers are also scouring the landscape for employers with good retirement plans. A recent survey from investment company Betterment found that 65% of workers said they would be tempted to leave their current job for a new one with better 401(k) benefits.
Savvy employers know this and are boosting their retirement benefits to attract workers. Whether that trend will meaningfully help workers reach their dream of a comfortable retirement, though, remains unclear.
“Our research shows there is a lot of work to be done,” Principal's Reddy said. “It’s our job to demonstrate how the right tools, resources, and education can help people remain calm through bouts of market volatility.”