American workers’ and retirees’ confidence about their retirement outlook has not yet fully recovered from the low it hit in 2023, but it is slowly building up again, a recent survey said.
The majority (68%) of workers and 74% of retirees believe they will have enough money to live comfortably throughout retirement, according to the Employee Benefit Research Institute and Greenwald Research survey. Workers and retirees feel more optimistic about their retirement prospects because of growing confidence in their income, the survey said.
To be sure, wage growth is currently outpacing inflation growth, according to the U.S. Census Bureau. Average hourly earnings increased by 3.9% for the 12 months ending in April, according to the Bureau of Labor Statistics. The inflation rate was 3.4% for that same time.
Inflation still remains a top reason for Americans’ lack of confidence and why, of those who are concered about retirement, 31% of workers and 40% of retirees said inflation is the cause. Additionally, 39% of workers and 27% of retirees who are not confident feel this way due to their lack of savings.
“Workers and retirees are also concerned that their retirement could be impacted by the U. S. government making changes to the American retirement system,” Greenwald Research CEO Lisa Greenwald said. “In fact, 79% of workers and 71% of retirees have this concern. Inflation’s impact on their retirement also remains a concern among workers and retirees.”
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Most rely on Social Security
Roughly 88% of workers and 91% of retirees said their retirement relied on Social Security as a source of income. However, 62% of retirees said Social Security is a significant source of revenue compared to 35% of workers who expect it to be.
Workers planned to begin claiming benefits at a median age of 65, the same age they expect to retire. Historically, 65 has been the median age for retirement in the U.S., but this year, 28% more workers said they expected to retire at 65, according to the EBRI survey.
Social Security trust funds will begin to run out of money by 2035. Senior citizens can expect their benefits to be reduced by 17% unless Congress takes steps to shore up the program, according to a recent report released by the Treasury.
“Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis,” Social Security Commissioner Martin O’Malley said. “Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation.”
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Workers estimated they need $1.5 million to retire
The amount workers said they need saved in order to retire comfortably tallied at $1.5 million, yet many are far from that target, the survey said. A third of workers said they had less than $50,000 in savings and investments and 14% had less than $1,000.
More than 4 million U.S. adults will turn 65 this year, according to a Northwestern Mutual survey. Still, among the generations closest to retirement, only half of Boomers (49%) and Gen Xers (48%) believe they will be financially prepared to retire comfortably, with many expecting that they will likely outlive their savings. Even more problematic is that while many older Americans across both generations anticipate a retirement shortfall, more than a third (37% and 38%, respectively) have not addressed it.
“People’s ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider,” Aditi Javeri Gokhale, Northwestern Mutual chief strategy officer, head of institutional investments and president of retail investments, said in a statement. “Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined.”
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