Many Americans feel behind on retirement planning, CNBC survey finds

Alexanderford | E+ | Getty Images

A large portion of Americans are worried about their nest egg.

CNBC’s Your Money International Financial Security Survey surveyed approximately 500 people each in nine countries. Of the 498 people surveyed in the United States, more than half (53%) said they were behind in retirement planning and saving. The survey was conducted by SurveyMonkey.

“I think most Americans struggle to save enough for retirement,” said David Blanchett, a certified financial planner and head of retirement research at PGIM, a money manager.

As part of its efforts for National Financial Literacy Month, CNBC will feature stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

For many families, money held in individual retirement accounts and 401(k) plans is a ‘key determinant’ of future retirement security, according to the Federal Reserve’s Financial Survey consumers.

Only 54% of Americans had a retirement account in 2022, according to the SCF, which is released every three years. Their typical balance was $87,000, as measured by the median value.

The situation is not much different for those on the verge of retirement. At this point, the typical person aged 55 to 64 had only $71,000 saved in a 401(k)-style plan in 2022, according to Vanguard Group data.

“Most Americans are going to need to save for retirement,” Blanchett said. “Yes, you can live on Social Security. But it probably won’t replace your pre-retirement standard of living.”

Households face competing financial choices

Many competing financial priorities can make saving for old age difficult.

Sometimes, especially for low-income people, there is a choice between surviving today and ensuring a good standard of living in the future, Blanchett said.

In 2022, households in the poorest 25% by wealth had a median net worth of $3,500, according to the SCF. For comparison, the top 10% had a net worth of $3.8 million.

Households at all income and wealth levels can simultaneously try to put money aside for financial emergencies, college savings, and buying a car or home, for example.

High inflation during the pandemic period has led to a rapid rise in the prices of daily goods and services. The purchasing power of the average worker declined for two years, from April 2021 to April 2023, as average wage growth failed to keep pace with inflation. (This trend has since reversed as inflation has fallen.)

Credit card debt is at all-time highs, suggesting Americans are relying more on credit cards to pay their bills.

“It’s hard to save for retirement when you can’t pay your rent,” Blanchett said.

Households are taking more responsibility for saving for their future as employers have shifted away from pensions to 401(k) plans.

Three in four (74%) American adults surveyed by CNBC plan to rely on government support in retirement, but only 42% of respondents have confidence in the government’s ability to support them.

Social Security benefits are financed by payroll taxes and assets held in a federal trust fund. However, demographic trends have placed emphasis on this trust fund. It is expected to be exhausted by 2033, when approximately 77% of promised benefits will be payable.

Congress is likely to intervene and the current benefit formula is unlikely to change for current and near-retirement retirees, experts said.

Access to 401(k) plans is a major gap

Succeed in financial literacy: More states require students to take personal finance courses

Globally, Americans appear to be lagging behind residents of other countries when it comes to retirement readiness, according to the CNBC survey.

CNBC surveyed residents of Australia, France, Germany, Mexico, Singapore, Spain, Switzerland and the United Kingdom, in addition to the United States.

For example, around 74% of respondents in France, 70% in Singapore and 65% in Mexico say they are on time when it comes to retirement planning and savings, according to the survey. Around 59% of respondents in Switzerland, 58% in Spain, 56% in the United Kingdom, 51% in Germany and 50% in Australia did so, higher than the 47% of respondents in the United States.

One of the biggest gaps in the U.S. retirement system, experts say, is access to a workplace retirement plan. About half of workers don’t have access to one and are unlikely to save for retirement outside of a 401(k)-style plan, they said.

“Compared to some of the highest-rated retirement systems, the United States falls short because employers are not required to offer a retirement plan, employees are not required to save, and can easily withdraw what they have saved, and our personal debt levels are crippling the ability of young workers to start saving for their future,” said Angela Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University.

She called these “fundamental and persistent challenges” to Americans’ retirement confidence and security.

Yet several states have launched so-called “auto-IRA” programs to improve access for workers and attempt to close the retirement savings gap.

Auto-IRAs require companies that do not offer a retirement plan to facilitate payroll withholding in a state-run program. They are still in the “early stages of implementation” but have already accrued 845,000 new funded accounts and 212,000 registered employers, she said.


Back to top button