Retirement confidence in America improving, annual survey finds

Access to a workplace retirement plan plays a crucial role in boosting retirement confidence. The survey reveals a stark contrast between those with and without access to such plans. Workplace savers are significantly more likely to feel on track for retirement (68%) compared to independent savers (47%).

This confidence gap can be attributed to several factors. Workplace plans often come with employer matches, which effectively boost savings rates. They also typically offer professional investment management options, such as target-date funds, which can help employees make more informed investment decisions. Additionally, workplace plans often provide educational resources and tools that can improve financial literacy and retirement planning skills.

The survey also shows that independent savers face unique challenges. They are 41% more likely to reduce retirement savings when faced with an emergency expense compared to those with workplace plans. Furthermore, 56% of independent savers report holding at least some of their retirement savings in cash, potentially missing out on growth opportunities.

These findings underscore the importance of expanding access to workplace retirement plans and highlight the need for policy initiatives aimed at supporting independent savers.

The survey reveals significant differences in retirement planning and confidence across generations:

• Gen Z (born 1997-2006). Despite being the youngest in the workforce, Gen Z shows a surprisingly high level of retirement awareness. The survey found that 77% feel on track to retire with the lifestyle they want, the highest of any generation. However, 69% worry about outliving their retirement savings, indicating a mix of optimism and caution. Gen Z also shows a strong preference for professional management, with 69% either currently invested in a target-date fund or planning to do so soon.
• Millennials (born 1981-1996). This generation faces unique challenges, balancing retirement savings with other financial priorities: 56% worry about outliving their retirement savings, and 62% carry credit card debt. However, 72% would stay with their employer if they matched student loan payments to their retirement plan, highlighting the impact of targeted benefits.
• Gen X (born 1965-1980). With retirement on the horizon, Gen X shows both diligence and concern. Some 80% report saving consistently for retirement, the highest of any generation. However, only 60% feel on track for retirement, the lowest of any generation. This discrepancy suggests a need for targeted support and guidance for this age group.
• Baby boomers (born 1946-1964). As they approach or enter retirement, Boomers are focused on income strategies. A total of 68% feel on track for retirement, but 51% are unsure how much income they'll need in retirement. Their experiences highlight the importance of retirement income planning, with 85% of retired boomers admitting that secure income makes a bigger difference than they thought it would.

These generational differences underscore the need for tailored retirement planning strategies and education that address the unique circumstances and concerns of each age group.

The survey reveals a significant gender gap in retirement confidence and planning. Men consistently report higher levels of confidence and lower levels of concern compared to women:

• Retirement readiness. 75% of men feel on track to retire with the lifestyle they want, compared to only 59% of women.
• Longevity risk. 65% of women worry about outliving their retirement savings, versus 57% of men.
• Income translation. 70% of women are confused about how to translate savings into monthly income, compared to 56% of men.

These disparities likely stem from various factors, including wage gaps, career interruptions for caregiving and differences in financial literacy. The findings highlight the need for targeted interventions to boost women's retirement confidence and preparedness, such as:

• Tailored financial education programs addressing women's specific concerns and circumstances.
• Workplace policies that support women's career continuity and earnings potential.
• Retirement planning tools and resources that account for women's typically longer life expectancies.

Addressing this gender gap is crucial for ensuring equitable retirement outcomes and overall financial well-being for all Americans.

Target-date funds (TDFs) emerge as a popular and effective tool for retirement planning, according to the survey. These funds automatically adjust their asset allocation to become more conservative as the target retirement date approaches, offering a "set it and forget it" option for many savers.

Key findings related to TDFs include:

• Widespread adoption. 61% of workplace savers are either already invested in a target-date fund or plan to do so soon.
• Employer support. 83% of plan sponsors agree that their participants would benefit from a target-date solution that includes guaranteed income.
• Reasons for use. Workplace savers invested in TDFs cite convenience and access to professional management as the primary reasons for their choice.
• Active management potential. 85% of plan sponsors agree that actively managed TDFs could generate incremental returns for their participants.

The popularity of TDFs reflects a growing recognition of the value of professional management in retirement planning. These funds can help address common investor behavioral biases and provide a disciplined approach to asset allocation throughout an individual's career and into retirement.

The popularity of TDFs reflects a growing recognition of the value of professional management in retirement planning. These funds can help address common investor behavioral biases and provide a disciplined approach to asset allocation throughout an individual's career and into retirement.

The survey indicates that plan sponsors are increasingly focused on helping employees generate income in retirement, recognizing this as a critical component of retirement security:

• Responsibility. 99% of plan sponsors feel responsible for helping their employees generate income in retirement.
• Income solutions. Adding investment options that provide secure income is the top single change plan sponsors say could improve future outcomes.
• Tools and education. A retirement income planning tool is the top workplace benefit sponsors believe will attract and retain talent in the current environment.
• Guaranteed income. 83% of plan sponsors agree that their participants would benefit from a target-date solution that includes guaranteed income.
• Active management. 85% of plan sponsors believe that actively managed target-date funds could generate incremental returns for their participants.

These findings suggest a shift in focus from accumulation to distribution strategies within workplace retirement plans. Plan sponsors are recognizing the need to provide solutions that help employees not only save for retirement but also manage their savings to provide sustainable income throughout retirement.

The survey results paint a complex picture of retirement confidence and planning in America. While overall confidence has rebounded, particularly among workplace savers, significant challenges remain. These include persistent gender gaps, generational differences in retirement readiness and the ongoing need for better retirement income solutions.