Retirement ‘Not Happening’ — For Those With No Retirement Plan

This article originally appeared from the American Society of Pension Professionals & Actuaries
By Nevin Adams • October 24, 2014

There were some mixed messages in a new survey about retirement savings.

The headlines were (as usual) all about retirement non-saving: the 34% reportedly not currently contributing anything to a 401(k), an IRA or other retirement savings vehicle, according to the fifth annual Wells Fargo MiddleClass Retirement study.

The survey went on to point out that a whopping 41% of middle-class Americans between the ages of 50 and 59 are not currently saving for retirement, while nearly half (48%) of middle-class Americans in their 50s said they wouldn’t have enough to “survive” on in retirement. Oh, and in a new (and likely to be broadly cited finding), 22% of the middle class say they would rather “die early” than not have enough money to live comfortably in retirement.

On the other hand (and you probably won’t hear nearly as much about these findings), 70% of those same survey respondents say they have a 401(k) or equivalent plan available to them through their employer, and the vast majority of them (93%) are currently contributing to their plans. Indeed, approximately two-thirds (67%) of those in a plan say they contribute enough to maximize their company’s 401(k) match, and the median contribution rate for those between the ages of 30 and 59 is 7%.

Sacrificial Lines 

Then there was the 61% of middle-class Americans, across all income levels included in the survey, who admit they are not sacrificing “a lot” to save for retirement (38% say that they are sacrificing to save money for retirement), though 72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65% in 2013.

Despite the middle-class positioning of the respondents, asked if they would cut spending “tomorrow” in certain areas in order to save for retirement, half said they would — but look at what they identified as areas to cut back:

 • 56% say they would give up treating themselves to indulgences like spa treatments, jewelry or impulse purchases;

• 55% say they’d cut eating out at restaurants “as often;” and

• 51% say they would give up a major purchase like a car, a computer or a home renovation.

However, just 38% report that they would forgo a vacation to save for retirement.

Here again, those who have access to a 401(k) are more likely to say they would give up certain expenses, big purchases or expenditures like eating out in order to save for retirement, at a rate approximately 10 percentage points higher than those without access to a 401(k)

Saving ‘Accounts’ 

Perhaps not surprisingly, about two-thirds (68%) of all respondents affirm that saving for retirement is “harder than I anticipated,” and more than half (55%) say they plan to save “later” for retirement in order to “make up for not saving enough now.”

For those between the ages of 30 and 49, 59% say they plan to save later to make up retirement savings, and 27% are not currently contributing savings to a retirement plan or account.

401(k) Impact 

Respondents between the ages of 30 and 49 said they were putting away a median amount of $200 each month for retirement, while those between the ages of 50 and 59 are putting away a median of $78 each month for retirement.

Once again, it was not surprising to find that 85% of those with access to a 401(k) or equivalent plan from their employer affirm they “wouldn’t have saved as much for retirement” if they did not have a 401(k). Moreover, 90% say the 401(k) or equivalent plan “makes it easy to save for retirement.”

Examining retirement savings by age, the median amount saved by those in their 40s is $40,000; for those in their 50s, it is $20,000; and for those between 60 and 75 it is $25,000. Here again, having a 401(k) made a difference, particularly for those who are younger. Middle-class Americans between the ages of 25 and 29 with access to a 401(k) plan have saved a median of $10,000 versus a median of zero savings for those without access, while respondents between the ages of 30 and 39 with access to a 401(k) have saved a median of $35,000 versus those without access, who have saved a median of less than $1,000. Those between the ages of 40 and 49 with access to a 401(k) have saved a median of $50,000 versus the $10,000 saved by those without access.

Having access to a 401(k) also seems to positively impact a sense of what is possible. Nearly 6 out of 10 (58%) non-retirees without access to a 401(k) plan say “it is not possible” to pay bills and “still” save for retirement, compared with about a third (32%) of those who have access to a plan but say they can’t save and pay bills at the same time.

Working longer or into traditional retirement years appears to be a predicted reality for a third of middleclass Americans, who say they will need to work until they are “at least 80 years old” because they will not have enough retirement savings, holding steady from a year ago. Half of those in their 50s say they will need to work until age 80. In another new question asked this year, a quarter (26%) of middle-class Americans say working into their 80s is something they plan to do even if it’s not a financial necessity.

On behalf of Wells Fargo, Harris Poll conducted 1,001 telephone (901 landlines and 100 cell phones) interviews with middle-class Americans in their 20s (ages 25-29 only), 30s, 40s, 50s, 60s and 70-75, surveying attitudes and behaviors around planning, saving and investing for retirement. The survey was conducted from July 20 to Aug. 25, 2014.

By Nevin Adams • October 24, 2014