If you’re concerned about your retirement, you may be surprised to find that a majority of Americans are not. A recent survey found that 7-in-10 U.S. workers are at least “somewhat confident” they will live a comfortable retirement, with 3-in 10 saying they are “very confident.”
Still, the pandemic has left a third of workers (and almost a quarter of retirees) feeling less confident in their retirement prospects.
According to the 32nd annual Retirement Confidence Survey, “those feeling less confident as a result of the pandemic and its economic impact were already among the more vulnerable and less retirement-ready Americans. They are more likely to report poor health, lower incomes and savings levels, and problems with debt.”
The 2022 survey of 2,677 Americans was conducted online January 4 through
January 26, 2022. All respondents were age 25 or older. The survey included
1,545 workers and 1,132 retirees
According to the survey results, “a third of workers and half of retirees who feel less
confident cite inflation and the cost of living as the reason for their
declining retirement confidence.”
Here are the key findings from the survey:
A majority of Americans don’t know who to trust with financial planning
Other key findings from the survey include the fact that 40% of workers and 20% of retirees say they don’t know who to go to for financial and retirement planning advice.
The survey found that many of these people “turn to non-professional sources, like family and friends (35% of
workers and 21% of retirees) or going online to do their own research (29%
of workers and 23% of retirees).”
A quarter of workers said they turn to their employer as a source of
retirement planning information, though employers fall behind advisors,
family and friends, and online research when it comes to being the most
trusted source of information, the survey found.
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Workers don’t feel fairly treated…
Another key finding of the survey: 3-in-10 workers suggested that t”hey don’t feel fairly treated in the workplace,” and a quarter said they’ve had trouble accessing employer-sponsored benefits for their
dependents or beneficiaries.
…but are still happy with retirement benefits
Despite that, more than 4-in-5 workers who are offered a workplace retirement savings
plan are satisfied with the benefit. “This is important given that
workers (82%) remain far more likely than current retirees (47%) to expect
their workplace defined contribution retirement plan to be a source of
income in retirement.”
A lot of workers expect to retire gradually
Roughly 40% of today’s workers expect to make a gradual transition into retirement, though only 17% of current retirees report having done that. Also, 70% of workers said they think they will work for pay in retirement, while
only 27% of current retirees report doing so. And 68% of workers expect income from a job to be at least a minor source of income in retirement,
compared with 22% of current retirees who report this as a source of income.
Some retirees are reporting higher-than-expected expenses
More than a third of current retirees (36%) said overall spending and expenses in retirement are
higher than expected — an increase from last year. When asked their top priorities for discretionary spending in
retirement, almost
half of retirees said travel, and a third said spending on leisure or
entertainment activities. And 40% said they are holding money aside or
investing for growth.
Read the complete survey results here.
This article was produced and syndicated by MediaFeed.org.
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Confused about retirement accounts? Read this
Saving for retirement is an important financial task. And while there are plenty of options available, many Americans are still confused about how best to prepare for retirement.
In fact, only 34% of Americans said they were knowledgeable about independent retirement accounts, according to a recent study by the LIMRA Secure Retirement Institute. And only one in five Americans knew the 401(k) contribution limits, according to a survey by TD Ameritrade.
Educating yourself about retirement accounts like the employer-sponsored 401(k), as well as self-directed options like a traditional IRA or a Roth IRA, is a critical part of preparing for your golden years. Here’s how to decide which one is right for you.
dima_sidelnikov / istockphoto
The first step to saving for retirement should be putting enough money in an employer sponsored 401(k) plan, if you have access to one. Take advantage of any matching employer contributions.
“If you work for a corporation that provides a 401(k) be sure to max this out, as their matching policy is ultimately equivalent to free money,” said Jared Weitz, CEO and founder United Capital Source. “This is the retirement account that offers the highest contribution value each year.”
Keep in mind 401(k) programs have some drawbacks and limitations, including administrative costs, said Samantha Anderson, a wealth manager at Budros Ruhlin Roe. In the same TD Ameritrade study, only 27% of Americans know how much in fees they are paying on their account.
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The biggest question to consider when deciding between a Roth or Traditional IRA is if you think your tax rate will be higher or lower in the future.
“Traditional IRA contributions are tax-deductible in the year they’re made, and a Roth IRA takes taxes out now, so that in the future when you withdraw money during retirement it is not taxed,” said Weitz.
If you think your tax rate will be higher during retirement, a Roth IRA is a good choice. If you expect to have a lower tax rate in retirement, the traditional IRA is likely a better choice to take advantage of the upfront tax break.
If you’re ready to start saving, check out our guide to opening an IRA.
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Roth IRAs offer more flexible early withdrawal rules and fewer restrictions for retirees. It’s also much easier to pass on a Roth IRA as inheritance, said Weitz.
There are however income limitations for contributions to a Roth IRA. The gross income for a single taxpayer is capped at $137,000 with contribution reductions starting at $122,000. For married couples filing together, income is capped at $203,000 and reductions start at $193,000.
The income maximums makes this type of account best for younger earners who are typically lower earners and have a significant amount of time until retirement, said Anderson.
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The benefits of a traditional IRA include not having to pay taxes on the money until funds are pulled out of the account, said Stephen Fletcher, a CFA with BlueSky Wealth Advisors.
“A traditional IRA is ideal for someone who needs to lower their taxable income now, and who will be able to be strategic in the way that the IRA funds are withdrawn in retirement so that the taxes paid will be as low as possible,” said Fletcher.
Don’t think you’re saving enough for retirement? Here’s how to catch up.
This article originally appeared on Policygenius and was syndicated by MediaFeed.org.
fizkes / istockphoto
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