·3 min read
If retirees could talk to their younger selves, they would tell them to save more for their golden years.
“We think about the regrets that most of our survey respondents had, it was that they did not start saving early enough,” Nate Miles, Allspring's head of retirement, told Yahoo Finance Live about the company's recent global investment survey of 2,758 adults near and in retirement.
As a result, many of Allspring's respondents are considering semi-retirement.
“About 25% of them have resigned to either working later and retiring at a later date and/or just expecting less in retirement,” Miles said.
But that's not always a viable option, according to the survey results. One of 4 early retirees had an unexpected early retirement due to job loss and health issues.
Instead, workers should focus on saving, Miles said.
He recommends workers save at least 10% of their income for retirement. Workers can even make up for lost time, if they started saving for retirement later in their careers. It just means consistently socking away more.
“One of the things that concerned us about the survey actually was that people that didn't start saving until after 40 were only saving 50% of the time at about a 10% rate," Miles said. "Even when people are saving later, they're not actually making up for those 10 or 20 years in terms of that delayed start date."
Employers also can play a role in helping workers meet their retirement goals through auto-enrollment plans. That's when workers are automatically enrolled in their company's 401(k) when they start. Some employers also offer automatic increases of contributions every year.
Studies have found that employers with auto-enrollment retirement plans have much higher rates of participation among their employees.
“For the majority of participants, they either lack the engagement or financial literacy to make often times the best decision for them. So things like auto-enrollment and auto-escalation will help resolve some of those issues on their behalf," Miles said. "And we're seeing more and more plans add that. With the recent passing of SECURE 2.0, we expect that even more participants in employer-sponsored plans will do that."
Auto-enrollment could also help women, who are more apprehensive about reaching their retirement goals, Miles said. The Allspring survey found that 69% of women are confident about their savings lasting through retirement compared with 87% of men.
“Generally, women are less confident in retirement and generally more anxious. Part of that is they oftentimes are not in the workforce for the entirety of their career, and so they're not benefiting from that time in savings," Miles said. "This is one area where the [auto-enrollment plans] will really help, where we're going to get more and more women in the workforce actually saving for retirement for longer."
Ella Vincent is the personal finance reporter for Yahoo Finance. Follow her on Twitter @bookgirlchicago
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube.
I possess a deep understanding of retirement planning, savings strategies, and the intricacies of financial literacy, backed by my extensive knowledge base encompassing various personal finance concepts, economic principles, and industry trends up to my last update in January 2022.
Concepts Discussed in the Article:
-
Regret of Late Savings: The primary theme of the article emphasizes the regret many individuals feel about not starting their retirement savings early enough. This underscores the significance of early financial planning for retirement.
-
Semi-Retirement: The article mentions that due to inadequate savings, a significant portion of respondents is contemplating semi-retirement. This means working part-time or reducing work hours instead of fully retiring.
-
Unexpected Early Retirement: A notable finding is that 25% of early retirees had to retire earlier than expected due to unforeseen circ*mstances such as job loss or health issues, highlighting the unpredictability of life events affecting retirement.
-
Recommended Savings Rate: Nate Miles recommends saving at least 10% of one's income for retirement. This recommendation stresses the importance of consistent saving habits to achieve financial security in retirement.
-
Delayed Start Date Concern: Even if individuals start saving later in their careers, they often fail to compensate adequately for the lost time. This phenomenon demonstrates the compounding effect of early savings and the challenges of catching up later in life.
-
Employer Contributions and Auto-Enrollment: Employers play a crucial role in facilitating retirement savings through auto-enrollment plans in 401(k) or similar retirement accounts. Automatic enrollment encourages higher participation rates among employees, thereby promoting better financial outcomes.
-
Auto-Escalation: Some employers offer auto-escalation features that automatically increase employees' contributions annually, enhancing savings without requiring active intervention.
-
Financial Literacy and Engagement: A significant portion of participants lacks financial literacy or engagement, making them less equipped to make optimal decisions regarding retirement savings. Auto-enrollment and auto-escalation serve as mechanisms to mitigate this issue.
-
SECURE 2.0: The mention of SECURE 2.0 refers to legislative changes aimed at enhancing retirement security, potentially leading to broader adoption of auto-enrollment and auto-escalation features in employer-sponsored plans.
-
Gender Disparity in Retirement Confidence: The article highlights a gender gap in retirement confidence, with women generally less optimistic about their retirement savings due to factors like intermittent workforce participation. Auto-enrollment plans can help address this disparity by encouraging more consistent savings among women.
In summary, the article underscores the critical importance of early and consistent retirement savings, the role of employers in facilitating such savings through automated features, and the challenges and disparities individuals face in achieving financial security in retirement.
