A new glimpse into how middle-class Americans think about retirement offers some surprising insights into how long they expect to live and keep working.
Nearly half of middle-income Americans who are currently employed say they plan to work past age 65. study Survey by the Transamerica Center for Retirement Studies and the Transamerica Institute. While many people say they want to retire, about 8 in 10 also cite financial pressures, such as not having enough savings or concerns that Social Security won't provide enough financial support.
Transamerica defines “middle class” as a broad sociological term, rather than a strict monetary income measure, as people who earn between $50,000 and $200,000 a year, which represents about 55 percent of U.S. adults.
“Many people are saving for retirement, but the question is, are they saving enough?” Catherine Collinson, CEO of the Transamerica Institute, told CBS MoneyWatch.
The dangers of longevity
Survey data shows that middle-class families have an average of $66,000 saved in retirement accounts, but as their savings grow, they may not have enough to cover their retirement expenses at their current age and lifestyle. $1.5 million A survey released earlier this year by Northwestern Mutual found that the typical worker said they needed money to retire comfortably.
Indeed, the number of 401(k) millionaires (those with at least $1 million in their retirement accounts) has risen recently. soared to a new recordThe stock market rally helped the number of U.S. pension fund accounts grow to 10 million, according to the latest data from Fidelity, but that reflects only about 500,000 accounts, a tiny fraction of the U.S. workforce of about 160 million people.
Meanwhile, many middle-class workers envision a retirement that could last 25 years or more, with many expecting an average life expectancy of 90. A longer retirement means people need to save more money to extend their time out of the workforce.
“Increasing human lifespans are causing people to rethink their life plans, including how long they plan to work after retirement,” Collinson added. “Many people envision working longer and retiring at an older age, giving them more time to earn and save, while others may be planning to fund a longer retirement.”
“It's not really retirement.”
Working past age 65 is becoming increasingly common in the U.S., with roughly one in five Americans over that age still employed — about 11 million people — according to the Pew Research Center.
Larry and Joyce Gesick, 77 and 66 respectively, recently said They continue to work because finances are tight, according to CBS News. “We're not really retired,” Joyce told CBS News. “We're working every day.”
According to renowned retirement expert Teresa Ghilarducci, only about 10 percent of Americans between the ages of 62 and 70 are financially secure when they retire.Work, Retire, and Repeat: Retirement Uncertainty in the New Economy“We explore the financial pressures facing retired Americans.
Part of the reason, Ghilarducci said, is the current retirement system, which places the onus on workers to manage their own savings decisions through 401(k) plans and similar plans.
In an ideal world, these plans would work well for retirement planning. But as Ghilarducci says: He told CBS MoneyWatch earlier this year: It's common for workers to experience job loss and financial stress that thwart their best intentions to save for retirement.
Even middle-class workers who have access to 401(k) plans don't always participate, with the Transamerica survey finding that about 1 in 7 workers don't have an employer-sponsored plan.
Many workers who enroll in 401(k) plans use their savings to prepare for retirement, the analysis found. Nearly one-third of workers said they had used their 401(k) or other retirement plan to take out a loan, take out an early withdrawal or make a hardship withdrawal, a rate Transamerica described as “worrisome.” The main reasons were financial emergencies or paying off debts, the company found.
These withdrawals can undermine your ability to save for a well-funded retirement and increase the risk of not having enough money in old age.
Despite these challenges, about 70% of middle-class Americans told Transamerica they are confident they can retire comfortably, with many picturing themselves traveling, volunteering or caring for their grandchildren after they leave the workforce.
“The middle class is optimistic that retirement is a time in life that offers many opportunities, such as travel, time with family and friends, and pursuing hobbies,” Collinson said. “But contrary to long-held belief, the middle class does not see retirement and work as mutually exclusive.”
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