Many American workers often focus on their retirement account balances and don’t always understand how it will translate into income during their retirement years. New LIMRA Secure Retirement Institute (LIMRA SRI) research finds 52 percent of all U.S. workers (ages 20-79) say it is difficult to know how retirement savings will translate into monthly income. The study suggests offering workers retirement savings income estimates can help bridge this gap.
About half of workers (52 percent) say they have seen an estimate of their retirement income. LIMRA SRI research shows men are significantly more likely than women to have seen a retirement income estimate – 60 percent versus 43 percent. This gender gap also shows up after people retire. About 4 in 10 retirees wished they had seen more frequent estimates of how much monthly income their savings would generate in retirement before becoming retired. Women lead this group compared to men 52 percent to 33 percent.
When it comes to generations, Baby Boomers are more likely to have seen an estimate of their monthly income than Gen X or Millennials. Viewing their monthly income in actual dollar amounts, rather than as a percentage of pre-retirement income, is more meaningful to Baby Boomers. Since they will most likely be retiring sooner than younger generations, they may have a better sense about what their retirement expenses will be.
Retirement income estimates help improve the retirement decisions of workers. As a result of seeing their estimated income, almost half of all workers (48 percent) increased their retirement savings. This could have the greatest impact on the savings habits of younger workers as they have more time to accrue savings. LIMRA SRI finds 55 percent of Millennials increased their retirement savings after seeing their estimated retirement income.
Understanding how retirement savings translates into retirement income also boosts workers’ confidence in their retirement. Among workers who received an estimate of what their income would be in retirement, almost 7 in 10 were confident they would live the retirement lifestyle they desired, and 7 in 10 were confident they were saving enough to live comfortably in retirement. In contrast, only 3 in 10 workers who didn’t receive this kind of estimate were confident in their retirement security. Additionally just 3 in 10 who didn’t receive their estimate said they were confident they were saving enough to live comfortably in retirement.
In order to help workers prepare for their retirement, financial professionals can make sure they promote income estimates, not just savings totals. In fact, LIMRA SRI finds 6 in 10 workers were savings more as a results of receiving their income estimate from a financial professional. Showing workers their retirement savings as income estimates, financial professionals can help make sure workers are saving enough and confident in their ability to lead the retirement lifestyle they want.