Americans have a bleak outlook for their retirement.
A Gallup poll out this week found that workers' expectations for a comfortable retirement are the most pessimistic they have been in over a decade. Nearly 6 in 10 (57%) of folks who are not yet retired anticipate a shortfall.
That’s up significantly from 52% who were gloomy last year, 47% in 2021, and 43% pre-pandemic. On the flipside, 77% of retirees report that they do have enough money to live comfortably – on par with last year’s sentiment.
The divergence in outlook between working Americans and retirees also extends to expectations over when folks will retire, if they’ll work, and major sources of retirement income, the latter of which workers are ramping up to offset their dour outlook.
"Expectations for a financially comfortable retirement are at their worst point in more than a decade among non-retirees in the US," Megan Brenan, a senior editor at Gallup, told Yahoo Finance. "In the past two years, high inflation and recession anxiety has resulted in less than half of non retirees being optimistic about their retirement."
Today, more than 42% of working Americans are very worried about being able to fund their retirement and more than 7 in 10 who are "at least moderately worried about being able to fund their retirement," according to the new poll.
The results of this year’s poll are based on telephone interviews conducted April 3-25, with 1,013 adults, as part of its annual Economy and Personal Finance survey.
The Gallup findings line up with a recent survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research that reported the certainty Americans feel about whether they'll have enough money for a comfortable retirement has taken the biggest dive in 15 years.
"The most significant finding is the drop in retirement confidence that hasn’t happened since 2007 to 2008 and 2008 to 2009 when the economy was in a recession," Craig Copeland, director of wealth benefits research at EBRI, previously told Yahoo Finance.
"Americans are having the same reaction as what they did during a recession," he added. "The current economy is not the best, but it is certainly not in a recession."
Americans’ grim outlook for their retirement also differs sharply by demographics, according to Gallup's research.
"Majorities in some demographic groups — including those with higher incomes, college graduates and young adults under 30 — have a positive outlook for their retirement," Brennan said.
Many workers plan to earn a paycheck in their retirement years, a tiny fraction of retirees do, according to the Gallup data. (Getty Creative) ·10'000 Hours via Getty Images
Half of the men surveyed versus roughly a third (36%) of women said they thought they would have enough money to retire comfortably. And for Americans between the ages of 18 and 29, more than half were confident they would be fine, yet less than 4 in 10 (39%) of workers nearing retirement — between 59 and 64 — said they thought they would be financially secure.
Americans with higher incomes and college graduates also were reasonably upbeat about their odds of skating a shortfall in savings. More than half of college graduates think they will have enough money to live comfortably as do nearly two-thirds of those surveyed who had the highest incomes.
Worker expectations over other parts of retirement also differ strikingly from the experience of current retirees.
For instance, the gap between when people expect to retire and when they do is big. The mean age at which non-retirees expect to retire is 66, while the actual mean age that retirees report having retired is 62.
One in four (39%) workers expect to retire over 65, the Gallup data found. A little less than 1 in 3 (32%) say they will retire before age 65.
There is also a false expectation by workers over getting paid for work in retirement While 20% of workers plan to earn a paycheck in their retirement years, a slim fraction (3%) of retirees do, according to the Gallup data.
There are lots of reasons for that dashed desire from health issues that prevent people from staying on the job to caregiving duties to ageism attitudes by employers making it tougher to get hired.
Gallup ·Gallup
Finally, workers have different ideas about where their income will come from in retirement.
Only 34% of workers expect Social Security will be a major source of income in retirement compared with 59% of retirees who say it is. That disparity could be a reflection of the worries over Social Security’s future.
A recent annual report showed Social Security's reserves are projected to run out in 2033, at which point the program will be able to pay out just 77% of benefits to seniors. The repercussions for many workers who plan to rely on Social Security for a major portion of their retirement income would be serious.
Meantime, 48% of those still working expect to rely on retirement savings accounts such as a 401(k) or an IRA in their golden years compared with 27% retirees that have found that to be true.
That could be why it appears that working Americans are increasing their savings rates.
This week, Fidelitypublished its 2023 Retirement Trends analysis and found that total 401(k) savings rates are up.
The total savings rate for the first quarter, which reflects a combination of employer and employee 401(k) contributions, improved to 14% (compared to 13.7% in the fourth quarter of last year, returning to the savings seen at the start of market volatility at the beginning of 2022.
Boomers still in the workforce are socking away savings at the highest levels of all age cohorts (16.7% versus 16.5% last quarter) and Gen Z saving levels have inched up as well (10.5% versus 10.2% last quarter). The average 401(k) balance for boomers is now $215,000; $145,000 for Gen X; and $44,900 for millennials, according to Fidelity’s breakdown.
"The data this quarter shows that boomers are saving at a very healthy rate," Michael Shamrell, vice president for workplace thought leadership for Fidelity, told Yahoo Finance. "Additionally, boomers are taking advantage of the IRS’s ‘catch-up’ contributions, allowing them to save additional money in their 401(k) beyond the normal limit, which can help them move closer to their retirement savings goals."
One explanation for the bump-up in savings rates is a feature many employer retirement plans now offer that allows savers to automatically increase their contributions annually.
Automatic escalation is designed to periodically increase your contribution rate to your 401(k) plan. For example, if you set the automatic escalation rate at 1% a year, every year your contribution rate will bump up by 1%.
"The uptick in account contributions is due to a growing number of participants leveraging the auto increase feature in their 401(k) plan," Shamrell said. "As of the first quarter of 2023, 70% of employer plans offered an auto increase feature and 17.4% of workers increased their contribution rate — of that percentage, roughly two-thirds was due to auto increase — the other one-third was ‘proactive’ by the employee."
Kerry Hannon is a Senior Reporter and Columnist at Yahoo Finance. She is a workplace futurist, a career and retirement strategist and the author of 14 books, including "In Control at 50+: How to Succeed in The New Work of Work" and "Never Too Old To Get Rich." Follow her on Twitter @kerryhannon.
