In a recent LIMRA survey of Americans not yet retired, 40% said they currently save no money each month toward retirement.
The LIMRA research indicates that fewer future retirees will have pensions to pay for their living expenses and more will be relying on their personal savings to fund their retirement. Without a significant change in savings behavior, many Americans will not have enough money to afford to retire.
The survey also found that 19% of adults not yet retired typically save less than $100 a month, while 27% save $100 to $499 a month. Even those with household incomes of $50,000 or more, a sizeable proportion—42%—are either saving $100 or less, or nothing, each month.
Looking at pre-retirees, the results were not much better: 41% of pre-retirees are not putting aside any money for retirement and a little more than one-fifth (21%) of pre-retirees save less than $100 a month.
People may think they will just continue to work until they die, but LIMRA’s research shows that 56% of retirees retired before they expected and 43% were involuntary. So the choice of when to retire may not be theirs.
Employer-sponsored retirement plans, such as 401(k), 403(b), etc., are an easy way for employees to save for retirement tax-free. LIMRA’s study revealed that many Americans who have access to one of these plans do not take full advantage of the tax-deferred savings.
While 55% of surveyed adults do not contribute at all to an employer-sponsored plan, of those that do, 48% contribute less than 5% of their annual earnings. Overall, more than 20% fewer women contribute to their employer-sponsored retirement plan than men (39% vs. 50%). In addition, the survey found that women are more likely than men to contribute less than 3% of their earnings (19% vs. 13%, respectively).
The good news is, despite the poor economy, only 12% of plan participants have decreased their contribution rate over the past year; 24% increased the amount saved and 64% kept their contribution the same.
As LIMRA stated, educating people about the benefits of systematic saving is critical. For more information on how to accomplish your savings and retirement goals, contact your personal agent or advisor or go here.