American workers are more secure in their retirement preparations now than before the Great Recession, but much more can and should be done, according to a comparative analysis of survey findings released today, A Retirement Security Retrospective: 2007 Versus 2017, by nonprofit Transamerica Center for Retirement Studies (TCRS).
“American workers encountered a myriad of challenges over the past decade, including high rates of unemployment, dramatic shifts in home values and volatility in the financial markets. While many workers are still recovering from the Great Recession, the good news is that many have seen improvements in their future retirement security,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
The new report illustrates the resilience of the U.S. retirement system, especially with regard to 401(k) or similar plans. The findings underscore that most Americans can still do more to adequately prepare themselves for retirement – even if they have recovered from the recession – and to do that successfully they need support from employers and policymakers.
Workers’ Savings Have Increased yet Many Are Not Adequately Planning
Workers have made progress in achieving higher levels of retirement security according to several survey findings, yet they also have some specific areas requiring attention. Key findings include:
- Household savings in all retirement accounts have dramatically increased since their pre-recession levels including among Millennials ($9,000 in 2007 to $36,000 in 2017), Generation X ($32,000 to $71,000), and Baby Boomers ($75,000 to $157,000) (estimated medians).
- 401(k) plan participation rates remain strong. Among workers who are offered a 401(k) or similar plan by their employers, approximately eight in 10 participate or have money invested in the plan. This finding remained relatively consistent between 2007 (77%) and 2017 (80%).
- Most participants use professionally managed offerings such as a managed account service, strategic allocation funds, and/or target date funds (net: 58%). Comparative data for 2007 is not available.
- Retirement plan leakage is an issue. Loans and early withdrawals can severely inhibit the growth of participants’ long-term retirement savings. By 2017, 30 percent of workers had taken some form of loan and/or early withdrawal from a 401(k) or similar plan, or an IRA.
- Many are still “guessing” their retirement savings needs. In 2017, workers estimated they would need $500,000 (median) in retirement, less than the $650,000 (median) found in 2007. Almost half of workers (49 percent) who provided an estimate of their retirement savings needs in 2017 said that they “guessed” the amount needed, a finding that is only slightly lower than 2007 (51%).
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