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From the United States to Australia, workers across the globe are concerned about running out of money in retirement.
This is according to research from Transamerica Center for Retirement Studies (TCRS), Aegon Center for Longevity and Retirement (ACLR) and Instituto de Longevidade Mongeral Aegon. Of the 16,000 workers in 15 countries surveyed, 40% said running out of money is a concern. The figure is larger in the U.S. (49%).
Another top concern for respondents was physical health, which was cited by 50% globally and 44% in the U.S.
“The future of retirement is in our hands. Increases in longevity bring a precious gift of extra time. On a societal level, we must re-envision our working years relative to time in retirement. We must also protect our health to fully enjoy this extra time,” said Catherine Collinson, CEO and president of nonprofit Transamerica Institute and TCRS, and executive director of ACLR. “A new social contract for retirement is necessary as Social Security and traditional pension plans face funding issues, in part due to increases in longevity, and individuals face the need to self-fund a greater portion of their retirement income, often without adequate support to do so.”
Only 29% of workers globally are very/extremely confident that they will be able to retire comfortably. In the U.S., that number rises slightly to 36%. Meanwhile, just 23% of people globally are very/extremely confident that their health care will be affordable in retirement — 31% in the U.S. Two in five people globally (41%) feel stressed about their long-term financial plans for retirement at least once per month. That number jumps to 51% for U.S.-based respondents.
The TCRS identified five fundamentals for retirement readiness:
- Start saving early and save habitually: The best route to retirement readiness is starting to save as early as possible and becoming a “habitual saver” who always saves for retirement. Only 39% of workers globally said they are habitual savers, compared to 53% of U.S.-based workers.
- Develop a written retirement strategy: Only 16% of workers globally have a written plan for retirement, 28% in the U.S. Fewer than half of workers — both globally and in the U.S. alone — are currently factoring future health-care expenses into their retirement savings needs (48%).
- Create a backup plan for unforeseen events which can have a catastrophic impact on household finances: Globally, 35% of workers have a backup plan to provide an income in the event they are unable to work before they reach their planned retirement age, compared to 41% of those in the U.S.
- Adopt a healthy lifestyle: Living healthy can help mitigate decline in older age and associated health-care costs. When asked which healthy behaviors apply to them, people most often cite avoiding harmful behaviors (60% global, 62% U.S.), eating healthy (60% global, 57% U.S.) and exercising regularly (53% global, 55% U.S.).
- Embrace lifelong learning: People must commit themselves to continuing education to keep their job skills up to date and relevant and to learn how to make informed choices in their retirement planning. Financial literacy is a compelling example of where improvement is needed.
Many individuals are counting on retirement income from Social Security, employer benefits and personal savings. The vast majority recognize that government retirement benefit programs are under strain. Globally, only 6% of people believe that the Social Security-like provision in their country will remain perfectly affordable and that the government should not take any action. That compares to 8% of people in the U.S.
Employers play an invaluable role in helping their employees prepare for retirement. Looking beyond the traditional role of providing workplace retirement benefits and health, disability, and life insurance, employers can expand their current offering to include workplace wellness programs. Employers can also promote lifelong learning through training, development and career-pathing programs.