2015 Wells Fargo Retirement Study

Transcription

1 2015 Wells Fargo Retirement Study Table of contents Overview 1 Key findings 2 Background and methodology 8 Harris Poll conducted the survey online of 1,993 affluent investors, ages who have $250,000 or more in investable assets, excluding retirement and property assets. Nearly 7 in 10 (68%) workers age 40+ admit they should have started saving earlier for retirement. And, less than half (45%) have been consistent savers. Overview as well as retirees are generally anxious and pessimistic about retirement with the majority believing that retirement in America is in a crisis state. Other dire sentiments expressed by at least a quarter of workers age 40+ included beliefs that they ll not have enough money to survive in retirement, they ll need to win the lottery in order to survive financially, and they ll never be able to retire and will work until they die or are too sick to work any longer. Despite these anxieties, or perhaps to help combat them, saving for retirement is the top financial priority for many workers 40+. Yet, about two-thirds of workers age 40+ admit that actually saving for retirement is harder than they anticipated. Current expenses and debt as well as not making enough are the common reasons given for not saving more for retirement. As a result of the struggle to save for retirement, many working Americans age 40 or older are hoping to earn more later or work into their 70s to make up for not saving now. However, relying on greater earnings in the future or working longer is a potentially risky strategy. Half of retirees stopped working sooner than they anticipated due mainly to reasons beyond their control such as health issues or employer decisions. There is a wide disparity across age groups in terms of what they have saved for retirement and their retirement savings goal. Although separated by an average of eight years, workers age are much better prepared for retirement than those workers age 60+. Workers age started saving an average of six years sooner and have saved a median of three times more than those age 60+ ($150,000 vs. $50,000). Additionally, the younger group has a higher estimate of the amount needed for retirement and have saved a higher percentage toward that goal. For those who saved consistently from the day they first started working, this diligence has made a difference. These consistent savers have accrued median retirement savings of more than 2.5 times the amount for those who did not consistently save. Income level does not necessarily predict saving behavior as nearly a third of workers 40+ with less than $50,000 in household income say they have consistently saved since they began working. Despite the struggle to save and general pessimism around retirement, most working Americans across all ages who have access to a 401(k) or similar plan are contributing to their plan. Consistent savers with access to a plan have saved four times as much for retirement as compared to those without access. Access to a 401(k) plan also helps bolster confidence around retirement. A majority of working Americans age 40+ with plan access feel more secure about their retirement because they are contributing to the plan. Additionally, more than half say they will be able to save enough through their 401(k) to live comfortably. While workers are generally very satisfied with the 401(k) as a means of saving for retirement, they are interested in getting more help with their 401(k) plans. Specifically, half plan of workers with access say they would like more help to make sure they re making the best choices for their retirement.

2 Key findings Retirement preparation varies across ages Working Americans in the 40+ age range differ widely in how much they have saved for retirement and their assessment of how much they think they ll need for retirement. This is especially true of workers age as compared to those 60+. With an average of eight years apart, workers age are much better prepared for retirement than those workers age 60+. Workers age have saved a median of three times more than workers age 60+ $150,000 vs. just $50,000 (see chart 1). Additionally, the younger cohort has higher and perhaps more realistic estimates of the amount needed for retirement ($500,000 vs. $300,000) and have saved a higher percentage of that goal 30% vs. 17%. The younger workers age began saving for retirement at the median age of 31 vs. 37 for those age 60+, perhaps a contributing factor to higher retirement savings. Chart 1: Retirement savings profile workers age and 60+ Retirement Saving Profile Average age started savings (Mean) Expected retirement age (Mean) Amounts saved for retirement (Median) $150,000 $50,000 Amount needed for retirement (Median) $500,000 $300,000 Savings toward retirement goal 30% 16.7% Household investable assets (Median*) $82,900 $40,200 Annual household income (Median) $100,000 $70,000 *Median calculated from range selected by respondents The difference in financial preparedness is also reflected in differences in attitudes towards retirement across these two age groups. Workers age have a more optimistic outlook for their retirement with nearly two thirds (62%) believing they will have enough savings to live comfortably in retirement vs. just half (51%) of workers age 60+ (see chart 2). Additionally, workers age expect to retire at age 65 vs. 71 for those age 60+ (see chart 1). Chart 2: Attitudes towards retirement for workers age and 60+ Workers I will have enough savings to live on comfortably throughout my retirement years 62% 51% I will need to work until I am at least 70 because I will not have enough retirement savings to live comfortably in retirement. 40% 54% It is not possible for me to pay my bills now and still save for retirement. 28% 41% I would need to win the lottery to survive financially in retirement. 21% 34% I ll never be able to retire. I ll be working until I die or am too sick to work. 19% 33% 2

3 Anxiety around retirement There is a great deal of anxiety around retirement across working Americans as well as retirees with eight in 10 (81%) workers age 40+ and seven in ten (70%) retirees believing that retirement in America is in a crisis state. Even workers who are consistent savers (e.g. they started to save for retirement from when they first started working) share this belief with three quarters (76%) agreeing with this sentiment. Additionally, this anxiety is reflected in attitudes toward retirement with more than a quarter (27%) of workers age 40+ believing they will need to win the lottery to survive financially in retirement and half (50%) believing their standard of living will go down once they retire (see chart 3). Among workers age 60+, attitudes are even more pessimistic with a third (33%) believing they will never be able to retire and will be working until they die or are too sick to work. Chart 3: Attitudes towards retirement for workers age 40+ and retirees I will have enough savings to live on comfortably throughout my retirement years. 58% 63% 52% 62% 51% 61% My standard of living will go/went down once I retire/when I retired. 50% 56% 44% 40% 55% 39% I m afraid of outliving my assets. 36% 35% 41% 36% 31% 38% I would need to win the lottery to survive financially in retirement. 27% 23% 32% 21% 34% 31% I m not going to have enough money to survive on in retirement. 27% 26% 26% 23% 35% 30% I ll never be able to retire, I ll be working until I die or am too sick to work. 26% 24% 29% 19% 33% 20% I d rather die early than not have enough money to live comfortably in retirement. Retirement saving top priority 19% 18% 15% 25% 23% 27% Despite anxiety surrounding retirement, or perhaps as a way to combat this anxiety, saving for retirement is the top priority among workers age 40+. More than a third (36%) say it is their top priority, followed by paying ongoing student loan or credit card debt (18%) (see chart 4). Chart 4: Biggest financial priority after paying essential monthly expenses Saving for retirement 36% 29% 37% 49% 39% 4% Paying ongoing student loan or credit card debt 18% 21% 16% 19% 16% 9% Supporting family members such as children, siblings, parents 14% 16% 14% 11% 12% 8% Building an emergency fund 7% 7% 9% 3% 6% 14% Saving for my first home, bigger home, or renovation 6% 7% 6% 2% 5% 5% Saving for future education expenses 5% 8% 5% 3% * 2% Paying off healthcare obligations 4% 4% 3% 3% 7% 13% Other 6% 5% 7% 6% 5% 19% None 3% 3% 1% 4% 7% 24% Not sure/refused (net) 1% * 1% * 4% 3% 3

4 While workers say saving for retirement is their top priority, almost two thirds (62%) say that actually saving is harder than they anticipated. More than a third (35%) say it s not possible for them to pay their bills now and save for retirement at the same time. The most commonly mentioned reasons for not saving for retirement included being overwhelmed with current expenses and debt and not making enough money to save. While workers appear to want to save for retirement, only four in 10 (38%) of workers age 40+ admit to sacrificing a lot in order to save (see chart 5). The same is true of retirees with four in 10 (40%) saying they gave up a lot to save for retirement. The most frequently mentioned sacrifices for workers age 40+ included foregoing major purchases (40%) and treating themselves to indulgences (39%). Confirming that these sacrifices were worth making, half of workers age 40+ (53%) and retirees (46%) believed that reducing expenses made a difference in their retirement saving. Chart 5: Sacrificing/gave up a lot to save for retirement [Non retirees] I m sacrificing a lot in order to save for retirement. [] I had to give up a lot in order to save for retirement. 38% 38% 44% 36% 34% 40% Given Up to Extend Saving Making big purchases I want (e.g., car, computer, home, renovations) 40% 51% 36% 26% 34% 32% Treating myself to indulgences (e.g., spa services, jewelry, golf, impulse purchases) 39% 43% 38% 36% 37% 34% Eating out at restaurants as often 31% 36% 31% 23% 29% 33% Going on vacation / traveling 30% 35% 31% 27% 24% 32% Going to special events like sports, theater, or concerts 30% 32% 26% 34% 28% 24% Nothing 35% 25% 38% 39% 49% 38% Removing expenses made a difference on retirement saving 53% 55% 61% 56% 33% 46% Starting early to save for retirement makes a difference 2.5x Nearly seven in 10 (68%) workers age 40+ admit they should have started saving earlier for retirement. Further, less than half (45%) have been consistent savers. For those who did make the commitment to consistent saving, it has made a significant difference. Those who saved consistently have accrued a median retirement savings of $160,000 compared to $60,000 for those who did not save consistently. Interestingly, income level does not appear to affect savings behavior. Three in 10 (31%) of workers with less than $50,000 in household income say they have consistently saved since they began working. Start saving early Workers who have consistently saved for retirement since the first day they began working have saved 2.5 times more than those who have not saved consistently. Save later and work longer A significant percentage of workers age 40+ are hoping to earn more down the road or work into their 70s to make up for not saving now for retirement. Specifically, nearly seven in 10 (68%) say they are hoping to earn more in the future to save for retirement (see chart 6). More alarming, a third (33%) of workers age and two in 10 (21%) age 60+ plan to save later to compensate for not saving now. Additionally, more than half (54%) of the 60+ workers say they plan to work until they are at least 70 because they will not have saved enough to live comfortably in their retirement years. 4

5 Chart 6: Plans to save later for retirement and work longer I m hoping to earn more money in the future to save enough for retirement/ I relied on my income in my later years to save for my retirement. 68% 78% 71% 63% 49% 67% I plan to save for retirement later in order to make up for not saving enough now. 39% 47% 44% 33% 21% N/A I plan to work into my 70s and beyond to stay active or mentally challenged, but not necessarily for the money. 54% 51% 52% 53% 61% 71% I will need to work until I am at least 70 because I will not have enough retirement savings to live comfortably in my retirement years. 51% 52% 52% 40% 54% 51% Average age started saving for retirement (Mean) Average planned/actual retirement age (Mean) Years to save for retirement (difference between age started saving and expected/actual retirement age) Yet, a strategy that relies on saving later and working longer is risky. Half (49%) of retirees stopped working sooner than they anticipated due largely to reasons beyond their control including health concerns (37%), employer decision (21%) or other reasons. Another factor that can complicate retirement plans is healthcare costs. Half of retirees (51%) agree that they are spending more for healthcare in retirement than they had expected. Early retirement, not by choice 49% of retirees retired earlier than planned, mostly due to circumstances beyond their control. Health 37% Employer decision 21% Family decision 10% Had adequate savings 7% Other 32% Implications: While workers recognize the importance of saving for retirement and have good intentions, they give way to procrastination and fail to follow through on consistent saving. Setting up automatic withdrawals to retirement savings accounts could help establish consistent saving behavior. Additionally, employers and financial service providers could help to encourage regular saving by providing access to savings calculators, automatic saving products, and services and budgeting tools. 5

6 The power of the 401(k) Seven in 10 (69%) workers age 40+ have access to a 401(k) and most with access (88%) are participating in the plan (see chart 7). Those who are contributing to a 401(k) have done so for an average of 18 years. Chart 7: 401(k) access, participation, and tenure Total % 70% 74% 71% 60% Have access to a 401(k) 88% 90% 85% 85% 90% Currently contributing to a 401(k) Average # of years enrolled and contributing to a 401(k) (Mean) Among workers who contribute to a 401(k), the median contribution amount is 10% of their salary. While nearly seven in 10 (69%) contribute enough to maximize their company s matching 401(k) contribution, 20% who are eligible don t take advantage of the employer match (see chart 8). Chart 8: 401(k) access, participation, and tenure 20% 10% 69% Yes No Does not offer Implications: While a high percentage of those who have access to a 401(k) are actively contributing, nearly a third (31%) do not have access to an employer-sponsored retirement plan. These workers could be encouraged to contribute to other taxadvantaged retirement savings vehicles such as IRAs and SEP or SIMPLE plans if they are self-employed. Additionally, two in 10 (20%) are not taking advantage of their company s matching contribution and leaving free retirement savings dollars on the table. Employers could consider targeting communications to this audience to encourage participation. have highly favorable sentiment towards their 401(k) with eight in 10 (84%) saying they feel more secure about their retirement because they re contributing to a 401(k) and three quarters (75%) say they would not have saved for retirement without their 401(k) (see chart 9). Consistent savers with access to a 401(k) have saved four times as much for retirement ($200,000 median) as compared to a median of $50,000 for consistent savers without access to a plan. 6

7 Chart 9: Attitudes towards their 401(k) I feel more secure about my retirement because I m contributing to a 401(k). I wouldn t have as much saved for retirement if I did not have a 401(k) or equivalent. 84% 92% 76% 79% 82% N/A 75% 78% 76% 72% 71% 63% I m satisfied with the 401(k) as a retirement savings vehicle. 72% 78% 71% 72% 61% 59% I know there are fees associated with 401(k) savings plans, but they are worth it. I m/was able to save enough through my 401(k) or equivalent to live comfortably in retirement. The fees associated with a 401(k) do not make it the best way to save money for retirement. I would save for retirement if I had access to a 401(k). (only asked among those without access) The 401(k) difference Workers with 401(k) plans... 70% 75% 75 65% 60% 56% 61% 63% 59% 63% 59% 56% 37% 33% 42% 41% 36% 47% 57% 59% 75% 60% 37% 57% 4x...saved 4 times more than those without access when they saved consistently....said they wouldn t have saved as much if they didn t have a 401(k) (75%)....felt more secure about their retirement because they are contributing to a 401(k) (84%). Despite high satisfaction levels with 401(k) plans, there is interest in getting more help managing their 401(k). More than half (53%) of workers age 40+ and two-thirds (66%) of retirees say they would like/have liked more help from their 401(k) plan to help make sure they are making the best choices. Implications: Given the popularity of 401(k) plans and the pervasive interest from plan participants in getting help making decisions on how to invest their retirement savings, employers and plan sponsors should consider providing tools and resources to help educate participants regarding their investment choices and plan options. No written plan for retirement Only two in five (40%) workers age 40+ have a written plan for retirement. The percentage is similar for retirees with just 44% saying they have a written plan. For most workers, their retirement plan consists of participating in a 401(k) or other employer-sponsored plan (38%) or working with a financial professional (30%). 7

8 Background and methodology About the Survey On behalf of Wells Fargo, Harris Poll conducted 1,251 telephone interviews of 851 working Americans 40 or older and 400 retired Americans, surveying attitudes and behaviors around planning, saving and investing for retirement. The survey was conducted from July 13 August 10, Working Americans are age 40 or older, working full-time or at least 20 hours if they are working part-time or self-employed. Retired Americans self-identified as retired regardless of age. The median annual household income reported by working Americans varies by age: years olds ($87,000); year olds ($91,000) year olds ($100,000); 60+ year olds ($70,000). Data were weighted as needed to represent the population of those meeting the qualification criteria. Figures for education, age, gender, race, ethnicity, region, household income, investable assets, and number of adults in the household were weighted where necessary to bring them in line with their actual proportions in the population. About Wells Fargo & Company Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,700 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune s 2014 rankings of America s largest corporations. Wells Fargo s vision is to satisfy all our customers financial needs and help them succeed financially. Wells Fargo perspectives are also available at blogs.wellsfargo.com. About Harris Poll Over the last five decades, Harris Polls have become media staples. With comprehensive experience and precise technique in public opinion polling, along with a proven track record of uncovering consumers motivations and behaviors, The Harris Poll has gained strong brand recognition around the world. Please note: This material has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Investors need to make their own decisions based on their investment objectives, financial circumstances and tolerance for risk. Investing involves risk including the possible loss of principal. Past performance is not a guarantee of future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Please contact your financial, tax and legal advisors regarding your specific situation and for information on planning for retirement. INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Insurance products are offered through our affiliated non-bank insurance agencies. Wells Fargo Bank, N.A., is a banking affiliate of Wells Fargo & Company. Wells Fargo Advisors is not a legal or tax advisor Wells Fargo Bank, N.A. All rights reserved. ECG (1 ea) 8