The Finance Of Longevity

America’s Workforce: The Reality of Retirement Readiness

Nearly half of Americans approaching retirement are not ready for their golden years

A 2018 White Paper from the Indexed Annuity Leadership Council (IALC), The State of America’s Workforce , supports the crucial role that employers play in our ability to save for retirement. Excerpts present ere with permission. Read the entire report here. View the IALC Gamer Ready Retirement video here.

What a beautiful image: a weeklong dream cruise along the Caribbean, with three generations of family laughing and enjoying the trip. There’s only one thing missing from this picture: the tens of millions of Americans who have little to no retirement savings. But preparing these Americans for their golden years is not an insurmountable task.

The information contained in this white paper, The State of America’s Workforce, is based on a large-scale, quantitative  survey of working Americans conducted during March 2018 by Research Now on behalf of the Indexed Annuity Leadership
Council (IALC). Our study included a total of 2,103 U.S. respondents aged 40–70 years old who are working full time. Consistent with the classifications and definitions used by the Bureau of Labor Statistics, white-, blueand gray-collar workers in a wide crosssection of the most populous industries (11) were included in the survey population. The goal was to determine how these Americans are approaching retirement planning and preparedness, including their level of retirement
readiness, associated emotions, challenges, barriers and opportunities.

More information on our methodology can be found by visiting www.FIAinsights.org/americasworkforce.

The statistics and numbers presented throughout this paper are based only on the results of the study described above, unless otherwise stated. The State of America’s Workforce study of more than 2,000 adults indicates that nearly half of Americans approaching retirement are not ready for their golden years. In contrast, a significant portion of individuals feel very ready for retirement and express great excitement for what is ahead. Why the disparity?

To understand this, let’s think about how individuals accumulate retirement savings. Do we wake up one day and proclaim: “Today is the day I will find and contribute to a retirement plan!”? No. We think about our retirement plan when
we start a new job and our employer enrolls us in the benefit plan. This system has potential, but it systematically requires employers to play a large role in offering access to financial products. When employers don’t do this, the burden
shifts to the individual. The State of America’s Workforce shows us that more than 10 percent of workers do not have access to any type of retirement savings plans from their current employer. While the traditional employer-sponsored
retirement savings model is changing, it is opening up opportunities for both the individual and the employer.

Beyond Employer-Sponsored Plans

For employers, costless nudges like defaults and automatic-enrollment have shown promise and continue to be the shining star within retirement research. For individuals, the story is more about going beyond the employer-sponsored savings options and being inspired to take control of one’s retirement destiny. America’s workforce will need to design a retirement that fits their needs, with or without access to employer-sponsored plans. To feel comfortable and secure about what lies ahead, individuals should explore several retirement savings options, including those offering a guaranteed lifetime income stream.

To help ensure time doesn’t slip away, they should also set deadlines for themselves to avoid further procrastination in the journey to a happy retirement. Yet, as The State of America’s Workforce shows, the story on retirement savings
goes much deeper. While there are significant differences and surprising similarities across the occupations and industries of America’s workforce, there is great hope for bettering financial futures. Read on to discover more about the
current state of America’s long-term savings outlook and ideas for collectively improving retirement readiness.

Retirement Readiness at a Glance

Almost one-fifth of all Americans approaching retirement are at the low end of the readiness spectrum
(not ready at all), having saved 20 percent or less of the money they will need for retirement. In general, workers in
blue- (e.g., precision production, craft and repair occupations; machine operators and inspectors; transportation and
moving occupations; handlers, equipment cleaners, helpers and laborers) and gray-collar occupations (e.g., skilled
technicians or paraprofessionals such as administrative workers and clerks) are less prepared for retirement than their
white-collar counterparts (49 percent versus 44 percent for white-collar workers “not ready at all” or “not very ready”).

Retirement also stirs feelings of anxiety. More than 40 percent of those surveyed report they are worried, with a slightly higher percentage of anxiety among blueand gray-collar workers, especially those employed in the Food Preparation and Serving industry...

Understanding and comparing retirement-readiness scores industry by industry shows there are important differences
and surprising similarities across the occupations and industries of America’s workforce. There is significant variation
among specific blue- and gray-collar industries, with Food Preparation and Serving workers, as well as Personal
Care workers, indicating the lowest levels of retirement readiness. Conversely, those working in Engineering and
Protective Services are performing above the norm of all workers when it comes to retirement readiness.

This indicates upward mobility for the blue- and gray-collar industry, signaling the potential for more workers to take
greater control of their financial futures.

Excitement Abounds

Everyone’s idea of retirement is different. The travel plans we imagined earlier could just as well be a visit to grandchildren or a European adventure. What the dream is doesn’t matter so much as how workers feel about the possibility of making it real. For the most part, America’s workforce is looking forward to having more time for family and their favorite activities, with more than half (57 percent) excited about retirement. In examining blue- and gray-collar industries, those employed in the Protective Services and Healthcare fields report the highest levels of excitement when thinking ahead.

Retirement also stirs feelings of anxiety. More than 40 percent of those surveyed report they are worried, with a slightly higher percentage of anxiety among blueand gray-collar workers, especially those employed in the Food Preparation and
Serving industry. In comparison, blue- and gray-collar workers in Engineering are among the least worried about their financial future. Overall, across all industries and workers, a very optimistic 21 percent say they are not worried a bit.

The Disparity Among Workers

Across all industries, employers have a significant impact on workforce retirement readiness. We can expect some disparity between white-collar workers and those in the blue- and gray-collar professions, simply based on income levels and access to savings plans. However, almost half of blue- and gray-collar workers report not being ready for retirement. The numbers are even higher for those employed in certain industries and/or at smaller-sized companies.

Despite these gaps in readiness and lack of employer help, today’s retirement landscape offers a variety of savings
options for workers to create their own retirement freedom. While retirement comes in all shapes and sizes, some
financial products, like fixed indexed annuities, work overtime to provide a lifetime income stream, while offering
tax-deferred growth and principal protection from market swings.

Information Is Key

Overall, American workers are satisfied with the amount of information their employer provides about retirement options. However, in comparing blue- and gray-collar industries, more than half of Personal Care workers are not satisfied at all with the information provided and 45 percent of Food Preparation and Serving workers feel the same.

  • Access to planning information correlates with retirement readiness. Compared to workers who feel very ready for retirement, unprepared workers show disappointment with the retirement information provided by their employers.
  • Among blue- and gray-collar workers, 26 percent describe themselves as not at all informed or only a little informed
    about retirement planning (compared to 20 percent of whitecollar workers). Again, we see disparity by industry when it
    comes to access to sources of financial information.
  • Construction and Extraction workers, as well as those in the Engineering field, are most likely to be very informed about
    retirement. Construction and Extraction workers also reported the highest levels of “helpfulness” from their employer in
    planning for retirement. On the contrary, Food Preparation and Serving and Personal Care workers were most likely to
    feel uninformed, with half of Food Preparation and Serving workers stating their employer is “not helpful at all.”

When it comes to seeking out information, employees of midsized companies (250 to 1,499 employees) are most likely
to look to human resources for financial planning assistance. Meanwhile, employees of companies with fewer than 50
people will frequently turn to family and insurance agents for advice. This pattern is consistent with additional data from the
survey, which shows that more than one-third of workers from companies with fewer than 50 employees say their employer
is “not helpful at all” in terms of retirement planning support. Talking with a financial professional, like an insurance agent or even a bank representative, is a simple first step in achieving long-term financial goals for workers across industries. Qualified voices can uncover savings strategies and financial products otherwise unknown to workers. It’s interesting to note workers who describe themselves as “very ready for retirement” report significantly higher levels of consulting a financial advisor compared to unprepared workers.

What’s the most common source to receive information or advice about retirement planning cited across all white-,
blue- and gray-collar workers at companies of all sizes? A financial advisor. Still, less than half of workers have consulted with an advisor, with blue- and gray-collar workers slightly less likely to do so.

 

Read the full white paper, The State Of America’s Workforce, here.

View the AILC Gamer Ready Retirement video here.