Retirement Readiness 2

Today’s generation of workers is losing faith in the current system’s ability to provide retirement income security. Globally, almost half the survey’s respondents (49 percent) believe that future generations of retirees will be worse off than those currently in retirement.

The survey’s findings further illustrate:

1.   With the cost of Social Security becoming a greater concern as people live longer, only seven percent of people globally feel that the government should do nothing because social security provisions will remain perfectly affordable in the future.

2.   Employer-sponsored retirement benefits are vital in helping people financially prepare for retirement. However, only 43 percent of workers say their employer offers a retirement plan that includes an employer contribution and just 27 percent have access to a retirement plan without an employer contribution.

Although the social contract may be in jeopardy, people have a positive mindset about retirement. For many, retirement has become an active stage of life in which people aspire to stay socially connected, participate in their communities and remain economically active. Fifty-seven percent of workers envision some form of transition to retirement in which they continue working as they currently are or work part-time for a while or during their retirement.

Most are planning to do so because they both want and/or need to work. Earning an income later in life provides workers with the opportunity to continue saving and delay drawing down their retirement benefits and savings.

Based on the survey’s findings, many face a financially vulnerable retirement:

1.   Globally, workers expect they will need 68 percent of their current annual income in retirement.

1.   Alarmingly, only a quarter (25 percent) think they will achieve this retirement income and a further 13 percent feel they will achieve around 75 percent of their required income.

2.   Only 13 percent of workers have a written retirement plan while 44 percent say they have a plan, but that it is not written down.

1.   Only 32 percent of workers have a backup plan if they are unable to continue working before their planned retirement age.

3.   Many people are failing to diversify their retirement investments. When asked what financial means, if any, they are currently using or have used to prepare for retirement, people most frequently cite

1.   social security/state provision (46 percent),

2.   savings accounts/money market funds/certificates of deposit (CDs) (38 percent),

3.   a private pension/individual retirement accounts (IRA) (29 percent),

4.   life insurance (24 percent),

5.   investments such as stocks, bonds, mutual funds, etc. (23 percent).

Only 19 percent cite a company-funded defined benefit plan and, even fewer, 16 percent, cite an employee-funded defined contribution plan.