Connecticut Money: Pandemic hurts confidence in retirement savings
The coronavirus pandemic is taking a toll on retirement confidence, according to an Aprilsurvey by Transamerica Corp. One in three baby boomers and one in four Generation Xerssay they feel less confident they will be able to retire comfortably.On the positive side, 53 percent said the pandemic has not changed their outlook, and 13percent said their outlook actually has improved. The April survey of American workerswas produced as a supplement to the 20th annual Transamerica Retirement Survey ofWorkers from December.
While seven in 10 respondents said they are saving for retirement, 56 percent said thepandemic is negatively impacting their savings rate. Other financing sources being affectedinclude credit cards (29 percent of respondents), unemployment benefits (26 percent), andfederal stimulus money (24 percent).Fifteen percent have withdrawn money from their 401(k) plan or other employmentretirement savings accounts, while 13 percent plan to do so.
The survey contains plenty of worrisome information. Take the baby boomer generation,those close to retiring and those working past retirement age. According to the survey, themedian amount saved in all baby boomer household retirement accounts is just $144,000,and the median percentage of annual salaries devoted to retirement savings is just 10percent. In fact, 37 percent of baby boomers said they expect Social Security to be theirprimary source of income in retirement. In addition, seven in 10 baby boomers are eitherworking past retirement age or expect to do so.
Unfortunately, these numbers do not inspire confidence that many of these baby boomerswill enjoy a comfortable retirement. For younger workers who hope to improve on thesenumbers, here are some retirement planning tips:Don’t count on your ability to continue working. While 37 percent of millennialsand Gen Xers expect some amount of retirement income from working, studies haveconsistently shown that fewer than 30 percent of people continue to work after retirementage, and the median retirement age has remained at 62 for many years. In fact, four in 10workers end up retiring earlier than planned due to health reasons, job losses or familyissues, according to the 2019 Retirement Confidence Survey by the Employee BenefitsResearch Institute.
Understand the three sources of retirement income. Financial security inretirement will require three separate flows of funds: Withdrawals from employer sponsored savings accounts such as 401(k) plans, withdrawals from personal savings andinvestment accounts, and Social Security payments.
Build savings and investments steadily. The first rule of retirement savings is toinvest at least the maximum amount your employer will match into your 401(k) plan. Afterthat, you should invest at least 20 percent of your current income into your personalsavings and investment accounts, including an IRA. You can’t control what will happen toSocial Security payments, but you can control how much of your income you set aside foryour future. Find ways to cut expenses and/or increase income.