BALTIMORE, July 30, 2014 /PRNewswire/ -- A new survey on
retirement spending by T. Rowe Price revealed that many recent
retirees who have 401(k)s and/or rollover IRAs have accumulated
significant nest eggs, and most say they are faring well, both
financially and emotionally. Meanwhile, workers in their 50s who
are participating in an employer 401(k) have also accumulated
significant assets, but feel more anxious about retirement than
those who have already retired.
To learn about the current landscape and help 401(k) plan
sponsors and participants, the survey focused on a unique
population: new retirees who have 401(k) account balances or
rollover IRAs and workers age 50 and older who are 401(k)
participants. The survey is based on a national sample of
1,507 retirees who have been in retirement for one to five years
and have a rollover IRA or an account balance in their 401(k) plan.
It also includes a second sample of 1,030 workers, age 50 and
older, who are currently contributing to a 401(k) plan or are
eligible to contribute and have a balance of at least $1,000.
Findings among retirees:
- Many have considerable savings: Recent
retirees reported median household assets (investable assets plus
home equity minus debt) of $473,000,
with 48% having $500,000 or more in
household assets. Of their investable assets, 38% was in stocks and
stock mutual funds, 13% was in asset allocation mutual funds, and
31% was held in cash. More than eight in 10 (82%) of the retirees
own real estate with a median of $191,000 in home equity.
- Social Security accounted for the largest
portion of their income: 43% of their income came from Social
Security. The second largest source came from traditional defined
benefit plans (19%), followed by amounts withdrawn from personal
savings and investment accounts including IRAs and defined
contribution plans (18%).
- Work is part of the picture: 21% are
working either part-time (16%) or full-time (4%). Another 14% are
retired but looking for work.
- Those with a withdrawal plan are
withdrawing close to 4% of their assets annually: 48% of
retirees indicated that they have a withdrawal plan, and the median
retirement withdrawal among them was 4% of their investable assets
within the past 12 months. But the average does mask some extremes,
including nearly a quarter who withdrew 8% or more and over a
quarter who withdrew only 1%.
- Living on less: Nearly three years
into retirement, retirees report living on 66% of their
pre-retirement income on average.
- But that has not translated to
dissatisfaction with their lifestyle: 57% report they live as
well or better than when they were working. And 85% agree with the
statement, "I don't need to spend as much as I did before I retired
to be satisfied," including 37% who say this describes them a
"great deal." Most (65%) like not spending as much and see it as a
new found freedom from "keeping up with the Joneses," with 25%
saying this describes them a "great deal."
- They feel satisfied: 89% are somewhat
or very satisfied with retirement so far. Additionally, 74% say
they are somewhat or much better off financially compared with how
their parents lived when they were their age.
- Most are flexible: 60% of the retirees
would rather adjust their spending up and down depending on the
market to maintain the value of their portfolio rather than
maintain the same level of spending year after year, at the expense
of potentially diminishing their portfolio.
- But there are exceptions…not everyone is
well off: Households of retirees who are not married or living
with a partner, are not doing as well as their married
counterparts, both financially and emotionally. And women represent
a greater proportion of single households than men: 48% of women
reside in single households compared with 26% of men. These single
households have only a median of $248,000 in investable assets plus home equity
minus debt combined (compared with $731,000 for married households). They are more
likely to be looking for work (19% vs. 11%), a higher proportion
are finding it difficult to live without their preretirement
paycheck (36% vs. 27%), more believe that they will run out of
money (19% vs. 11%), and fewer are "very satisfied" with their
retirement experience (37% vs. 48%).
Findings among workers age 50 and older:
- Workers are more anxious than
retirees: A greater percentage of workers believe that they
will have to reduce their standard of living compared with the
retirees (49% vs. 35%). More workers also believe that they will
run out of money (22% vs. 14%). And they are less likely to believe
that they will have enough money to pay for health care (49% vs.
70%).
- But most have considerable savings:
Workers have accumulated median household assets (investable assets
plus home equity minus debt) of $465,000. They are invested less conservatively
than their retired counterparts, with 47% of their investable
assets in stocks or stock mutual funds, 13% in asset allocation
funds, and 23% in cash. Of the workers, 81% own real estate, with a
median of $171,000 in home
equity.
- They do not plan to use home equity to
generate retirement income: 60% do not plan to tap their home
equity at all for retirement income, and only 11% plan to use more
than half of their home equity.
- High savings rates: The median
personal deferral rate for their retirement plan is 10%, not
counting any match that they may receive from their employer.
- Confidence that they will save enough:
The median minimum they would like to save is $693,000 before they retire and 61% are confident
that they will hit that number.
- They expect to work longer and have
considered delaying retirement: On average, they expect to
retire at age 68. Additionally, 43% have considered delaying
retirement in the last 12 months.
- Social Security can be delayed: 80%
indicated their intent to wait until at least their full retirement
age (age 66) to begin collecting Social Security benefits, with 34%
willing to take the maximum benefit at age 70. Only 20% indicated
their intent to collect Social Security benefits as soon as they
become eligible (age 62).
- Job security is a concern: 29% of the
workers are somewhat or very concerned that they may lose their
jobs in the next 12 months.
Quotes
Aimee
DeCamillo, head of T. Rowe Price Retirement Plan Services,
Inc.
"For workers approaching retirement, we know
there is anxiety and uncertainty as they look ahead and think they
can't possibly be prepared for retirement. But this study
demonstrates that you can do it. Many people are successfully
saving in the private retirement system, and they report that post
transition, they are fine. We have an opportunity to share these
positive stories with 401(k) savers. We also need to emphasize the
important role Social Security plays as the foundation of
retirement income for most American households and the strategic
advantages of delaying Social Security benefits."
Anne Coveney, senior manager
of Thought Leadership at T. Rowe Price
"While we know there
are people with little or no retirement savings, our survey
suggests that many who participated in a 401(k) are entering
retirement with considerable assets. And new retirees are flexible
with their spending and report high satisfaction with their
retirement so far."
About T. Rowe Price
Founded in 1937, Baltimore-based T. Rowe Price Group, Inc.
(NASDAQ-GS: TROW) is a global investment management organization
with $738.4 billion in assets under
management as of June 30, 2014. The
organization provides a broad array of mutual funds, subadvisory
services, and separate account management for individual and
institutional investors, retirement plans, and financial
intermediaries. The company also offers sophisticated investment
planning and guidance tools. T. Rowe Price's disciplined,
risk-aware investment approach focuses on diversification, style
consistency, and fundamental research. For more information, visit
troweprice.com, Twitter (twitter.com/troweprice), YouTube
(youtube.com/trowepricegroup), LinkedIn
(linkedin.com/company/t.-rowe-price), or Facebook
(fb.com/troweprice).
About the survey
This research is based on online
interviews with workers and retirees. This includes 1,030 working
adults age 50 or over who are currently contributing to a 401(k)
plan or are eligible to contribute and have a balance with their
current employer of $1,000 or
more. Retirees are represented by 1,507 adults who have
retired in the past one to five years and who have a rollover IRA
or an account balance in a 401(k) plan. Interviewing was
conducted during February 19 - March
3, 2014. Findings in both samples are subject to a
margin of error of just under 3%.
PDF
- http://origin-qps.onstreammedia.com/origin/multivu_archive/PRNA/ENR/PH79532-T-Rowe-Price-Survey-v-POV.pdf
SOURCE T. Rowe Price