According to U.S. News & World Report’s “Older Workers Losing Faith in 401(k)s,” Emily Brandon says that workers over 50 are worried that their 401k plans will not take them as far as they hoped when starting their careers. While they only plan on their 401k plans covering 26% of their retirement income, young workers expect their 401k’s to finance 39% of their retirement. Whether they use 401k annuities or other investments after retirement will depend on how the rest of their careers pan out. Current older workers plan for Social Security to cover 35% of their retirement income, while younger workers are not so optimistic. They only expect Social Security payments to pay 20% of their retirement expenses.
Unfortunately, workers don’t think they will will be able to replace as much of their income during retirement as they did just 3 years ago. Older workers have lowered their expectations from receiving 69% of of their pre-retirement income during retirement down to 62%. And while 37% of those surveyed in 2007 were confident they could receive the 69%, only 29% actually believe they’ll get the 62% today. Younger workers are not as pessimistic as their older cohorts regarding retirement financing though. They expect to replace 83% of their current income during retirement, which is only a decrease of 2% since 2007.
At least half of older workers think that they’ll have to work longer than they anticipated earlier in their career. They also regret some decisions they’ve made during retirement planning, mostly taking on more risk hoping for larger returns. If they compare annuities to some other investment options, they might choose the safety of guaranteed retirement income over some previous choices. Most workers plan on employers matching their 401k contributions, but there are still 19% of workers who don’t have that benefit. Only 8% of all workers are maxing out their 401k contributions, probably because of the worry that they need the greater salary today to meet expenses. Younger workers are lucky enough to have the time to save more and make changes, but it is never too late to use 401k annuities to secure retirement income for older workers as well.