Most workers older than 40 have inadequate retirement savings and are not saving enough to catch up, yet most expect retirement income far greater than even the highest Social Security benefits, according to recent research by the Insured Retirement Institute, a trade group for the annuity industry.
Although workers also believe that protected lifetime income is a critical characteristic of a retirement investment, they need to save more to produce that income, the findings showed.
IRI conducted the consumer survey in March to gauge the retirement savings behaviors, retirement preparation steps, retirement expectations and retirement investment preferences of 990 workers ages 40 to 73 who are employed part or full time.
The study found that retirement saving behavior does not support the retirement income expectations of many workers. Thirty percent of respondents thought they would retire before age 65 and therefore see reduced Social Security benefits. Fifty-eight percent of workers believe they will need at least $55,000 in annual retirement income.
But only 41% have tried to calculate how much they will need to save to meet retirement income expectations, so they are not connecting income potential to their savings.
"Older workers are under saved and regret that they have not saved more or wished they had started saving earlier," Frank O'Connor, IRI's vice president of research and outreach, said in a statement. "Improving retirement prospects requires an increase in the percentage of income saved."
The survey found that while 74% of workers are saving for retirement, savings rates are not nearly high enough for even the youngest respondents to grow their nest eggs to a level sufficient for meeting their income and budget expectations.
"These findings highlight the importance of plans not only auto-enrolling but auto-escalating retirement plan participants to increase savings rates," O'Connor said.
IRI noted that some employer-provided retirement plans automatically enroll workers and deduct a percentage of each paycheck to contribute to the plan, while others automatically raise the percentage deducted annually up to a maximum of 10%. Employees can opt out of the auto-enrollment and auto-escalation at any time.
