Many American workers could be woefully short of the funds needed to pay for home care, senior living or skilled nursing facility care, according to a new report by the nonprofit Transamerica Center for Retirement Studies in collaboration with Transamerica Institute. Demographic disparities heighten the issue.
The estimated mean total household retirement savings among American workers is only $67,000, according to “Emerging From the COVID-19 Pandemic: A Compendium About U.S. Workers’ Retirement Outlook.” Demographic disparities play a role in workers’ ability to save.
“Strengthening the US retirement system requires expanding retirement plan coverage, making it affordable for employers to offer benefits and easy for workers to save in the workplace, and ensuring workers of all ages have meaningful employment, income, and incentives to save. It also requires implementing reforms to address Social Security’s funding shortfalls and strengthening safety nets,” stated Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Success can be best achieved by a collaboration among policymakers, industry, academics, nonprofits, employers, and individuals. Every stakeholder plays a vital role in transforming the future.”
It’s no surprise that lower-income workers are unable to set aside significant earnings to save for retirement. The data show that 67% of workers with household incomes of less than $50,000 believe that they do not have enough income to save for retirement. Just 60% of workers with household incomes of less than $50,000 are offered a 401(k) or similar plan by their employers; of those, only 58% of the surveyed workers said they chose to participate.
Households reporting $50,000 to $99,999 in income fare better, however. Seventy-four percent of workers in this group said they are offered a retirement plan, and 76% of them said they participate in it. In households where the income is $100,00 or more, 78% of workers said they are offered a retirement plan, and 85% said they chose to participate.
Workers with household incomes of less than $50,000 reported that they have just $3,000 saved in household retirement accounts. Workers with household incomes of $50,000 to $99,000 said they have saved $42,000, and those with household incomes of $100,000 or more said they have saved $172,000. The figures all are estimated medians.
Part-time workers are less likely to be offered employer-sponsored retirement plans. Forty-eight percent of part-time workers surveyed said they expect to retire when they are aged 70 or older or that they do not plan to retire. Twenty-nine percent of part-time workers said they expect Social Security to be their primary source of income in retirement.
Demographic information, according to Transamerica Center for Retirement Studies / Transamerica Institute.
“Educational attainment brings career opportunities, higher pay and better employer benefits which translate to improved retirement confidence,” said Collinson.
Surveyed workers without college degrees have saved $32,000 in total household retirement accounts, which is much less than the $170,000 saved by workers with a college degree (estimated medians).
Among those surveyed who are aged 25 and older, workers with a college degree are twice as likely as those without a degree to be “very” confident in their ability to fully retire with a comfortable lifestyle (35% and 17%, respectively).
Rural workers are worse off financially in preparing for retirement than their urban or suburban counterparts. Rural workers have lower household incomes than suburban and urban workers ($65,000, $88,000 and $90,000, respectively) (estimated medians).
Only 66% of surveyed rural workers are offered employer sponsored retirement plans, and 72% of them said they participate. By comparison, 74% of both urban and suburban workers are offered plans; 77% and 80% of them participate, respectively).
Forty-five percent of rural workers said they expect to retire when they are aged 70 or older or that they do not plan to retire. Thirty percent said they expect Social Security to be their primary source of income in retirement.
According to the report, 38% of working adults currently are caregivers or have been caregivers in the past, and 85% of those caregivers said they have made one or more adjustments to their employment situation, ranging from missing days of work and reducing hours to foregoing a promotion or quitting a job.
“With the skyrocketing costs of long-term care services and supports, many workers will be called upon to be an unpaid caregiver for an aging parent or loved one. This labor of love often involves trade-offs in a worker’s employment and financial situation which could compromise their future retirement,” Collinson said.
The tide has changed in recent years for those in the LBGTQ+ demographic.
“Historically, the LGBTQ+ community has been a demographic segment more likely to retire in poverty. However, in recent decades, the LGBTQ+ community has made great progress with the enactment of legal protections and recognition of rights,” Collinson said. “Importantly, the legalization of same-sex marriage makes same-sex spouses eligible for government and employer-sponsored retirement benefits. Today’s LGBTQ+ workers have a brighter retirement future.”
Sixty-seven percent of surveyed LGBTQ+ workers said they are offered employer-sponsored health plans, and 77% said they participate.
Seventy-three percent of non-LGBTQ+ workers are offered a plan; 78% participate.
LGBTQ+ workers have saved $31,000 in total household retirement accounts, whereas non-LGBTQ+ workers have saved $70,000 (estimated medians).
Forty-four percent of surveyed LGBTQ+ workers said they expect to retire when they are aged 70 or older or that they do not plan to retire.
Race / ethnicity
“Our societal focus on diversity, equity, and inclusion has solidified the imperative for bridging racial inequalities,” Collinson said. “The survey findings reflect the dynamic nature of the workforce, highlight retirement-related similarities and differences, and surface questions for further research.”
Among the survey respondents, Black workers are more likely than Asian American / Pacific Islander, Hispanic and white workers to be offered an employer-sponsored health plan (80%, 76%, 73%, 71 %, respectively). Among those offered plans, however, data show that Black workers are less likely than other races /ethnicities to participate in them (65%, 78%, 79% and 80%, respectively).
Asian American / Pacific Islander workers have saved the most in total household retirement accounts, according to the survey results, followed by white, Hispanic and Black workers ($105,000, $86,000, $45,000 and $34,000, respectively) (estimated medians).
Part of TCRS’ 22nd Annual Retirement Survey of Workers, the compendium is based on a survey of employed workers at for-profit companies conducted in late 2021.
“Amid concerns about Social Security, the disappearance of traditional defined benefit pensions, and intensifying expectations that workers self-fund a greater portion of their retirement income, many workers are inadequately saving and are at risk of not achieving a financially secure retirement,” Collison said. “Enhancing retirement security involves addressing demographic disparities, removing structural barriers, and future-proofing the system so everyone can retire with dignity.”