While most people look forward to retirement, how they'll actually achieve it remains unclear.
In a recent survey of American workers we uncovered a significant gap between workers' desire to live a comfortable retirement and their confidence in being able to achieve this goal.
By taking a closer look at the responses of both workers and plan sponsors, we identified four trends that may be driving this mismatch.
Understanding these insights can help financial professionals better support plan sponsor clients and their participants.
1. When to retire looks fuzzier.
In the past, retirement was largely based on one factor — age.
Due to a number of new variables — like perceived unpredictability of Social Security, a decline in pension plans, or even the state of the world in light of the pandemic — workers no longer seem to have a firm grasp on timing.
For instance, one in five plan to retire based on a gut feeling, while around the same number (19%) don't know how they will decide when to retire.
Perhaps due to this uncertainty, planned retirement age and actual retirement age might not match.
On average, workers plan to retire at age 65, which differs from the actual retirement age of 63.5.
In fact, over the last five years there's been a notable increase in people leaving the workforce between ages of 60 to 65 according to our data.
Understanding the realities of the average retirement age and how participants attempt to project their retirement date can help plan sponsors better grasp the mindset of their workforce.
Providing education and calculators for workers, particularly those nearing retirement, can give workers added confidence and a clearer vision of the future.
2. Work no longer stops at retirement
Retirement of the past often meant a time to relax, start a new hobby, or spend more time with family.
While some of that still holds true today, it will often also involve some form of work.
Only a third (32%) plan to be fully retired, while the same number (32%) will take a phased approach.
Another one in five (21%) plan to work in retirement.
A closer look reveals the intent to continue working aligns more to the older Gen X and Baby Boomer generations.
Offering near-retirees a phased retirement could help all involved — the plan sponsor enjoys the benefits of the employees' skills and tenure longer while the worker gets to test drive retirement a bit, which should help with the transition to having more free time.
Interestingly only 3% of retirees report being dissatisfied with their retirement once it begins.
This gives plan sponsors a powerful tool — information and snapshots related to retiree satisfaction.
Hearing about others' positive view of retirement may encourage participants to consider firming up their own plans.
3. Retirement income needs are unknown.
One contributing factor to the gap between workers' goals to live comfortably in retirement and their confidence in achieving it may come down to a lack of income planning.
Sri Reddy is senior vice president of Retirement & Income Solutions at Principal.
