Despite recent years of inflationary spikes and stock market volatility, most Americans haven’t cut their retirement savings rate. They also don’t plan to sell assets or investments and are taking action to get professional advice to plan their retirement.
If you need help saving and planning for retirement, consider working with a financial advisor.
Those are the main findings from the third edition of “Empowering America’s Financial Journey – How People Save, Invest and Get Advice,” an annual report published by the financial services firm Empower.
But even as most of the survey’s respondents demonstrated resilience when it comes to their retirement savings, others were showing signs of struggle, with the rate of hardship withdrawals and loans from retirement accounts on the rise.
“Despite the economic challenges American workers are facing, it is reassuring that most are taking positive steps to pursue their financial goals,” Edmund F. Murphy III, president and CEO of Empower, said in a statement. “This study uncovers that 68% of working Americans are confident they will be financially ready for retirement.”
American Workers Under Pressure
While inflation has declined over the last year, that doesn’t mean the cost of living has gone down – it’s just getting more expensive at a slower rate. To cope, the study found that workers have created budgets for themselves, reduced their spending and started moonlighting to bring in more income. Other positive steps include increasing their retirement savings (35% of respondents), as well as meeting or planning to meet with a financial advisor (56%)
Other good news was that the retirement savings rate remained steady at 8%. Then again, a mere 11% of workers feel they’re saving enough for retirement. However, most feel they’ll be able to close that gap, evidenced by more than two out of three saying they’ll be ready for retirement when it comes.
Racial and Ethnic Trends
Across four racial/ethnic groups – white, Black, Asian and Hispanic – the percentage of workers who felt somewhat confident or very confident about retirement readiness was about the same, ranging from 67% for white workers to 74% for Black workers. Sixty-eight percent of Asian workers and 70% of Hispanic workers reported similar confidence. The percentage of workers in those groups who described themselves as financially healthy was also similar, ranging from 26% for Asian workers to 33% for Hispanic workers. Meanwhile, 29% of white workers reported feeling financially healthy and 31% of Black workers said the same.
But a deeper dive reveals trouble spots in terms of financial equity. While 46% of Black workers reported savings of less than $20,000, just 17% had balances of more than $100,000. More than half of all Black workers (51%) and nearly four out of 10 Hispanic workers (39%) reported having under $50,000 in total assets. When it came to investment balances of more than $500,000, just 10% and 4% of Hispanic and Black respondents, respectively, reported having this much money. On the other hand, 14% of white and Asian workers had at least $500,000.
Saving and Planning for Retirement
The study found workers turning to a wide range of sources for information and guidance about saving and investing for retirement.
Toward the bottom of the scale, 11% said they listened to podcasts but just 6% considered them trustworthy. Meanwhile, 47% of respondents said they consider financial advisors trustworthy but far fewer workers have consulted one (30%). Overall, the top three sources of financial information were online tools (36%), retirement plan providers (34%) and family members (32%).
How Americans Are Planning for Retirement
Workers are setting healthy financial priorities, the study found, with “saving for retirement” at the top of the list, followed by “paying off debt,” “making ends meet” and “building an emergency fund.” In addition, 67% of workplace savers reported that they’re actively involved in their retirement plans. These engaged workers invest 53% more in their retirement accounts than unengaged workers.
Among those engaged workers, those who reported using financial wellness tools and seeking out advice saved more than those who didn’t use those resources. Savers who had linked three or more accounts were saving 30% more than those without linked accounts, and 72% of those with accounts linked took advantage of financial wellness tools. Workers can link accounts by rolling money from old 401(k)s and similar workplace savings plans into their current employer’s plan, making it easier to manage and monitor investments and reduce fees.
The 45-page study is based on an analysis of 5.3 million active defined contribution participants with Empower as the recordkeeper. It also incorporates the findings from a survey of 2,511 Americans’ attitudes, confidence, and sentiments related to retirement planning.”
Most workers who are participating in their employer-sponsored retirement plans have kept their retirement savings rate steady and responded to higher prices by cutting spending or finding additional income. But some are struggling and just 11% feel that they’re saving enough for a comfortable retirement.
Retirement Planning Tips
- A financial advisor can do a lot more than simply invest your money for you. They can also help you build a comprehensive retirement income plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This free tool will estimate how much you’ll have when the time comes to retire and how much you may need to support your spending in retirement.
Photo credit: ©iStock.com/Jacob Wackerhausen, ©iStock.com/AsiaVision, ©iStock.com/