Most Workers Have a Workplace Retirement Savings Plan, but is it Enough?

Millions of people are nearing retirement, but many have inadequate savings that could jeopardize their financial stability. A report from the Transamerica Center for Retirement Studies, in collaboration with the Transamerica Institute, surveyed 5,730 workers from four generations to assess their retirement preparedness and use of workplace plans.

High Participation in Retirement Plans

The study found that many workers participate in employer-sponsored 401(k) or similar plans: 71% for Gen Z, 85% for Millennials, 82% for Gen X, and 80% for Baby Boomers. Additionally, three-quarters of all generations have been offered a retirement plan by their employers.

The median age to start saving in these plans has decreased with each generation: Gen Z began at age 20, Millennials at 25, Generation X at 30, and Baby Boomers at 35.

Savings Shortfall

Despite high participation rates, many are not saving enough. While the ideal retirement savings goal is $1.5 million, the actual savings are much lower: Boomers have $194,000, Gen Xers have $93,000, Millennials have $50,000, and Gen Z has made a good start with $40,000.

Concerns About Social Security

Many respondents are worried about the future of Social Security. Notably, 79% of Gen Xers, who are nearing retirement age, fear that Social Security will not be available for them. Nearly one-third of this group expects Social Security to be their primary source of retirement income.

“Millions of U.S. workers are at risk of not achieving a financially secure retirement,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.

“The situation is intensifying with Social Security’s and Medicare’s projected funding shortfalls, population aging, skyrocketing costs of long-term care, and workers’ obstacles in saving and investing.”

Priorities for Financial Security

When asked what the President and Congress should prioritize to ensure financial security in retirement, respondents highlighted:

• Addressing Social Security’s funding shortfalls (58%)
• Addressing Medicare’s funding shortfalls (46%)
• Making out-of-pocket health care expenses and prescription drugs more affordable (46%)
• Ensuring all workers can save for retirement in the workplace (45%)

Fixing Social Security

Survey respondents suggested ways to address Social Security shortfalls, including:

• Increasing the maximum earnings subject to payroll taxes (40%)
• Increasing the Social Security payroll tax rate (38%)
• Preserving retirement benefit payments for retirees in greatest need (34%)
• Raising the retirement age (23%)

“Workers are counting on Social Security for retirement income. The clock is ticking with the Social Security trust funds’ estimated depletion in the next decade.

The sooner Congress takes action, the more time workers will have to adjust their financial plans before they retire. The longer Congress waits, the more disruptive the changes could be,” Collinson stated.

In conclusion, while many American workers participate in workplace retirement plans, the savings accumulated are often insufficient. Addressing Social Security and Medicare funding shortfalls, alongside enabling better savings opportunities, are critical steps needed to ensure financial security for future retirees.