Just 24% of Americans believe that they are behind in feathering their retirement nests, although retirement savings rates vary dramatically across demographic segments, according to survey results released Friday from nonprofit Transamerica Center for Retirement Studies in collaboration with Transamerica Institute.
“Demographic influences can profoundly affect an individual’s and family’s ability to prepare for a financially secure retirement. A greater understanding of these influences can help policymakers, the retirement industry and employers to identify opportunities, envision solutions and inform priorities for strengthening our retirement system,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
Household income has big role
“Lower-income earners have fewer funds available to save and, moreover, they have less access to employer-sponsored benefits that can help them save, invest and protect their savings. As a result, they often end up relying on Social Security to fund their retirement,” Collinson said.
It stands to reason, then, that retirement savings increase with increased household income.
According to the survey results, among those not yet retired, individuals with household incomes of less than $50,000 have been able to put aside $1,000 in total household retirement accounts. Individuals with household incomes of $50,000 to $99,999 have been able to save $36,000. Amounts saved increase from there. Those with household incomes of $100,000 to $199,999 have saved $156,000, and those with household incomes of $200,000 or more have saved an estimated $609,000.
Additionally, according to the report, individuals earning less than $50,000 are less likely to have employer-sponsored 401(k) plans. Among those who are offered a 401(k) by their employers, 59% have chosen to participate.
Rural Americans less secure
Rural Americans are less secure in their retirement savings, according to the survey results.
“Economic activity in the US has become concentrated in urban and suburban areas in recent decades. As a result, rural residents have been left behind in many ways, including retirement readiness,” Collinson said.
Only 17% of rural residents said that they are “very confident” they will be able to fully retire with a comfortable lifestyle, compared with 20% of suburban and 27% of urban residents, the survey noted. Additionally, rural Americans in general have lower household incomes than urban and suburban residents.
“Among those who are not yet retired, rural residents have saved $7,000 in total household retirement accounts, while urban residents have saved $50,000 and suburban residents have saved $67,000,” according to the report.
Race, ethnicity can play a role
Asian and Pacific Islanders have the most wealth among Americans, according to the report. The median income for Asian and Pacific Islanders is estimated at $99,000, with median income for whites at $77,000, Hispanics at $56,000 and Blacks at $50,000.
Blacks (37%) and whites (34%) are more likely to rely or expect to rely on Social Security as their primary source of retirement income than Hispanics (28%) and Asian and Pacific Islanders (19%), according to the results.
Women less likely to have sufficient savings
“Women are at greater risk than men of not achieving a secure retirement,” Collinson said. “For women, the persistency of the gender pay gap, limited access to employer benefits and time out of the workforce for parenting and caregiving often translates to lower retirement savings and fewer government benefits.”
Women reported an average household income of $59,000, which is substantially less than the $82,000 reported by men. Additionally, 52% of women are employed or self-employed, compared with 67% of men.
“Among employed workers, women are less likely than men to be offered a 401(k) or similar plan by their employers (71%, 79%, respectively). And, among them, women are less likely than men to participate in it (76%, 82%, respectively)” according to the report.
LGBTQ+ community makes great progress
The LGBTQ+ community has made strides in being able to save for retirement, according to the survey results.
“Historically, the LGBTQ+ community has been a demographic segment at greater risk of retiring in poverty. In recent decades, however, 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+ community has a more favorable retirement outlook than prior generations, but they still face headwinds.”
Respondents who identify as LGBTQ+ tended to be much younger than non-LGBTQ+ respondents (aged 33 and 48 years, respectively).
“Employed LGBTQ+ workers are less likely than non-LGBTQ+ workers to be offered a 401(k) or similar plan by their employers (70%, 76%, respectively) in part due to their occupations. Among those who are offered a plan, LGBTQ+ workers are less likely than non-LGBTQ+ workers to participate in the plan (69%, 81%, respectively),” according to the report.
In general, Collinson said, “strengthening the US retirement system requires addressing Social Security’s funding shortfalls and reinforcing social safety nets … [and ensuring] that workers have access to meaningful employment throughout their working years, expand retirement plan coverage so that all working Americans have the ability to save in the workplace.”
