WINDSOR, Conn., Oct. 18, 2011 — In a recent survey of Americans age 18 and older (not yet retired), 40 percent said they currently save no money each month toward retirement.
"These findings are alarming," said Matthew Drinkwater, associate managing director, LIMRA Retirement Research. "Our research indicates that fewer future retirees will have pensions to pay for their living expenses and more will be relying on their personal savings to fund their retirement. Without a significant change in savings behavior, many Americans will not have enough money to afford to retire."
The eNation survey, conducted on behalf of LIMRA in October 2011, also found that 19 percent of adults not yet retired typically save less than $100 a month, while more than a quarter (27%) of consumers save $100 to $499 a month. Even those with household incomes of $50,000 or more, a sizeable proportion (42%) are either saving $100 or less, or nothing, each month.
Looking at pre-retirees (age 55-64), the results were not much better. Forty-one percent of pre-retirees are not putting aside any money for retirement and a little more than one-fifth (21%) of pre-retirees save less than $100 a month.
"People may think they will just continue to work until they die, but our research shows that 56 percent of retirees retired before they expected; 43 percent were involuntary. So the option may not be theirs," noted Drinkwater.
Employer-sponsored retirement plans (401(k), 403(b), etc.) are an easy way for employees to save for retirement tax-free. LIMRA's study revealed that many Americans who have access to one of these plans do not take full advantage of the tax-deferred savings.
While 55 percent of surveyed adults do not contribute at all to an employer-sponsored plan, of those that do, 48 percent contribute less than five percent of their annual earnings. Overall, more than 20 percent fewer women contribute to their employer-sponsored retirement plan than men (39% vs. 50%). In addition, the survey found that women are more likely than men to contribute less than three percent of their earnings (19% vs. 13%, respectively).
The good news is, despite the poor economy, only 12 percent of plan participants have decreased their contribution rate over the past year. Twenty-four percent increased their saving rate (i.e., the percent of annual earnings saved) and 64 percent kept their contribution rate constant.
"Obviously, educating people about the benefits of systematic saving is critical," said Drinkwater. "But research proves that auto-enrollment and auto-escalation programs within employer-sponsored retirement plans are valuable tools to help employees get to adequate contribution levels that will help them reach their financial goals in retirement."
LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.