A new report from the Employee Benefit Research Institute has revealed some frightening figures about the average Americans’ retirement preparedness.
Perhaps the most striking finding in the 2014 Retirement Confidence Survey is that 36% of workers surveyed have less than $1,000 in retirement savings. And, those 36% are among 60% who have less than $25,000 in retirement savings. The chart below from the report shows a breakout of the total savings reported among workers going back across 10 years of the retirement confidence surveys.
Older workers tended to report higher amounts of retirement savings. 80% of workers age 25–34 have total savings and investments of less than $25,000, compared with 48% of workers age 45 and older. At the same time, 16% of workers age 45 and older cite assets of $250,000 or more.
Total savings also increased with education, health status and household income as 68% of workers who reported having less than $1,000 in retirement savings had household incomes below $35,000 per year.
Despite the abysmal savings figures, there is some indication that the workers surveyed are aware they need to do a much better job of saving in order to have a comfortable retirement. One third said they need to save 20% of their income and 22% said they need to save between 20% and 29% of their income. However, 22% also said they don’t know how much to save.
Workers also acknowledged that personal savings will need to play a major role in funding their retirement. 71% said they anticipate receiving income from an employer sponsored plan, 65% said an IRA, and 68% said other savings and investments. 79% are counting on Social Security as being a source of income. However, this figure is interesting because the survey also notes that these workers have very little confidence in Social Security’s ability to pay benefits by the time they reach retirement. Only 8% said they were “very confident” about the program’s ability to provide benefits and 35% were “not at all confident.” For some additional reading on this topic, see Social Security: A Program in Trouble and Social Insecurity.
The good news for federal employees is that they are ahead of the average worker in saving for retirement if the figures reported by the Thrift Savings Plan are any indication. As of December 2013, the average balances in the TSP (both traditional and Roth) were as follows:
If you are behind in saving for retirement, remember that it’s never too late to start. Talk to a financial planner about your situation, to learn how much you are likely to need in retirement, and develop a savings plan to start putting away money. Open a Roth IRA or consider saving money in mutual funds each month. And federal employees can of course take advantage of investing in the Thrift Savings Plan.