New research released recently by the non-profit Transamerica Center for Retirement Studies underscores how American workers are largely unprepared for retirement and, further, how relatively few have a backup plan in the event they are forced into retirement earlier than planned. The results of the 12th Annual Transamerica Retirement Survey—conducted among 4,080 American workers—found that for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65.
According to The Center’s research, 40% of respondents now expect to work longer and retire at an older age since the recession began. Altogether, 39% of American workers plan to retire after age 70 or not at all, and over half (54%) of workers plan to work in retirement. Of those who plan on working after retirement or age 65, the most commonly cited reasons are out of necessity (44%).
While many workers may plan to work past the traditional retirement age or never retire, unforeseen circumstances could force them to stop working before they planned. The survey found the majority of workers are unprepared for this scenario—70% agree they could work until age 65 and still not have enough money saved to meet their retirement needs. This sentiment spans across age and income:
- 69% of those in their twenties and 72% of those in their thirties agree they could work until age 65 and still not have enough money saved,
- 80% of those with a household income (HHI) of less than $50,000 agree,
- 74% of those with an HHI $50-$100,000 agree,
- And, 59% of those with an HHI over $100,000 agree.
Meanwhile, about a third of workers (31%) anticipate not just needing to provide for themselves in retirement, but for additional family members as well.
“With all of life’s uncertainties, planning not to retire is simply not a viable retirement strategy,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Planning to work past age 65 is an important opportunity to continue earning income, save more, and help to alleviate a retirement savings shortfall; however, it’s important that workers be proactive in setting a retirement savings goal, saving and investing for retirement, and having a backup plan if they are forced to retire sooner than expected.”
Retirement Without a Safety Net
The survey uncovered that a vast majority of workers (82%) do not have, or are unsure if they have, a backup plan in place in the event they cannot work as long as they need to, and that rate is even higher among those who plan to work past age 70 or never retire (87%).
“In today’s society, it’s more important than ever for workers to take personal responsibility for achieving a financially secure retirement. Our research highlights the risk American workers are taking by not having a backup plan in place in the event they are forced to retire sooner than expected,” says Collinson. “It is so vital that everyone have a firm grasp of their retirement saving and planning options, and have a contingency plan if they have to retire sooner than planned or are faced with a health issue that could quickly erode their savings.”
A large number (44%) of American workers do not have a strategy to reach their retirement goals. Of those who do have a strategy, only half have factored in healthcare costs and one-fifth have factored in long-term care insurance. Additionally, just 57% of workers have factored in Social Security and Medicare benefits.
Overall, relatively few workers have a good grasp of how government benefits will impact their retirement: 40% know quite a bit or a great deal about Social Security, 28% know quite a bit or a great deal about Medicare and 23% know quite a bit or a great deal about Medicaid.[Source: "12th Annual Transamerica Retirement Survey." The Transamerica Center for Retirement Studies. 17 May 2011. Web. 17 May 2011.]