Today’s retirees are happier than workers, despite some having an unmanageable amount of debt and a high level of financial stress, according to the 2019 Wells Fargo Retirement Study.
“Our survey clearly shows stark differences between current retirees and younger generations and how they will fund retirement,” said Fredrik Axsater, head of the Institutional Client Group for Wells Fargo Asset Management. “For those still in the workforce, saving for a viable retirement lies almost entirely in their own hands, which requires a vastly different strategy and approach. As an industry, we need to ensure that more workers take the necessary actions today to adequately fund their retirement tomorrow.”
Conducted online by The Harris Poll on behalf of Wells Fargo, the study surveyed 2,708 workers age 18 to 75; and 1,004 retirees.
The study found several key characteristics that influence today’s retiree, who— in the survey— had an average age of 70.
More than eight in 10 of retirees fund their retirement primarily with Social Security or a pension; just five percent say personal savings, such as an IRA or a 401(k), is their main source of funding.
For younger generations the quality of their retirement will depend almost entirely on how much they save through vehicles such as a 401(k) or IRA.
Approximately 45 percent of Millennial workers say the top source of funding for their future retirement will come from an IRA or a 401(k), compared to just 25 percent who say they expect to rely on Social Security or a pension for their retirement income.
“I think it’s fair to say that there’s a mismatch between savings that people have, and also what they expect to need in order to feel safe,” Axsater said. “Generation X, as an example, on average have $66,000 in savings and they say that they will need on average $750,000 in order to retire comfortably. So, this study is really a call to action— for us to build a stronger foundation.
“A call to action is needed to get more and more people into what we call the planning mindset— the mindset where people have a combination of other long-term financial goals. It’s time for action.”
Despite recognition that saving and paying for retirement now rests with the individual, younger generations hold mixed views about whether they are saving enough, the study revealed.
Financial challenges negatively impact the ability of nearly half of workers to save adequately, according to the survey.
Overall, just over half (55 percent) of workers say they are saving enough for retirement. By generation, 61 percent of baby boomers say they are saving enough, followed by Millennials (55 percent), Generation X (51 percent) and Generation Z (48 percent).
Debt plays a crucial role in workers’ ability to save, as 31 percent of Millennials say they have an “unmanageable amount of debt,” followed by Generation X (26 percent), Generation Z (25 percent) and baby boomers (14 percent).
Among all workers, nearly half (46 percent) say they are putting off saving for retirement due to current financial challenges, and 67 percent of workers paying student loans say the burden of student loans is getting in the way of saving for retirement.