New study illuminates the middle class's
personal finances, retirement preparations, and public policy
priorities
LOS ANGELES,
Aug. 28,
2024 /PRNewswire/ -- Only one in five people in
the U.S. middle class (21%) are very confident in their ability to
fully retire or maintain a comfortable lifestyle throughout their
retirement, according to a new survey report, The Retirement
Outlook of the American Middle Class, released by nonprofit
Transamerica Center for Retirement Studies®
(TCRS) in collaboration with Transamerica
Institute®.
"The middle class symbolizes the American dream," said
Catherine Collinson, CEO and
president of Transamerica Institute and TCRS. "In today's chaotic
environment, what are the middle class's hopes, dreams, and
retirement prospects? What support is needed from policymakers to
help ensure they can retire with dignity? Our new report seeks to
answer these pressing questions."
The Retirement Outlook of the American Middle
Class examines the well-being, personal finances, and
retirement expectations and preparations of U.S. residents who are
in the middle class. Absent a universally accepted definition among
demographers and research organizations, Transamerica Institute and
TCRS broadly define the middle class as people with an annual
household income (HHI) between $50,000 and $199,999.
Ten Facts About the Retirement Outlook of America's Middle
Class
"America's middle class is navigating the turbulent
post-pandemic economy and high rates of inflation. They are focused
on their health and financial well-being, but many are at risk of
not achieving a financially secure retirement," said Collinson.
Based on the survey's findings, these 10 facts illuminate how
people in the middle class are faring and financially preparing for
older age:
- Enjoying purposeful, meaningful lives. The middle
class's top priorities in life include enjoying life (67%), being
healthy and fit (62%), focusing on family (45%), planning for their
financial future (44%), leading a more sustainable life (28%),
their career (28%), giving back to the community (24%), pursuing
lifelong learning (23%), and serving as a caregiver (16%).
- Embracing positivity albeit with signs of
distress. Most people in the middle class have positive
feelings about life including having close relationships with
family and friends (87%), being generally happy (85%), enjoying
life (84%), having a strong sense of purpose (79%), having a
positive view of aging (72%), and having an active social life
(64%). However, some are also experiencing distress such as often
feeling unmotivated and overwhelmed (39%), often feeling anxious
and depressed (38%), having trouble making ends meet (37%), and
being isolated and lonely (25%).
- Planning to live to an old age. People in the
middle class plan to live to age 90 (median). One in seven (14%)
are planning to live to age 100 or older. More than one in three
(36%) are "not sure," a reasonable answer given the nature of the
survey question.
- Dreaming of an active retirement. The top five
retirement dreams among the middle class are traveling (67%),
spending more time with family and friends (58%), pursuing hobbies
(51%), doing volunteer work (23%), and taking care of their
grandchildren (20%). One in four (25%) dream of doing some form of
paid work in retirement such as starting a business (13%), pursuing
an encore career (10%), and/or continuing to work in the same field
(9%).
- Fearing potential financial and health-related challenges
in retirement. The top five greatest retirement fears among
the middle class are outliving their savings and investments (40%),
declining health that requires long-term care (40%), Social
Security will be reduced or cease to exist in the future (39%),
cognitive decline, dementia, Alzheimer's disease (33%), and
possible long-term care costs (32%).
- Juggling a variety of financial priorities.
People in the middle class face competing financial priorities that
include paying off debt (59%), saving for retirement/continuing to
save for retirement (49%), building emergency savings (42%), saving
for a major purchase or life event (31%), and just getting by to
cover basic living expenses (31%).
- Expecting to work beyond traditional retirement
age. Among those who are not yet retired, almost half of
people in the middle class (49%) expect to work beyond the
traditional retirement age, including 34% who expect to retire
after age 65 and 15% who do not plan to retire. Moreover, more than
half (52%) plan to continue working after they retire. However, the
actual experience of retirees raises doubts about whether these
expectations are realistic. The median age that middle-class
retirees retired is 62. Half of them (50%) retired sooner than
planned often due to employment or health-related issues.
- Counting on diverse sources of retirement income.
The middle class is expecting diverse sources of retirement income.
Regarding their expected primary source of retirement
income, more than four in 10 people (45%) are expecting it to come
from self-funded savings, including 401(k)s, 403(b)s, IRAs and/or
other savings and investments. Others are expecting their primary
source of retirement income to come from Social Security (27%), a
company-funded pension plan (11%), and income from continued work
(9%). Only 2% are expecting it to come from home equity or
from an inheritance.
- Risking inadequate retirement savings. Fewer than
one in four people in the middle class (24%) strongly agree they
are building or have built a large enough retirement nest egg. As
of late 2023, among those who are not yet retired, people in the
middle class have saved $66,000
(estimated median) in total household retirement accounts.
Middle-class retirees reported $186,000 in total household savings excluding
home equity (estimated median).
- Missing opportunities to improve their retirement
outlook. The middle class has yet to fully engage in
retirement planning and take steps that could improve their
prospects. Only 21% indicate they have "a lot" of working knowledge
about personal finance, 24% have a financial strategy for
retirement in the form of a written plan, and 17% frequently
discuss saving, investing, and retirement planning with family and
close friends. Only one in three (34%) use a professional financial
advisor.
"By gaining knowledge and engaging in financial planning, the
middle class can make better informed decisions in their daily
lives which could, in turn, improve their long-term retirement
prospects. However, they also need better, stronger societal
support," said Collinson.
Priorities for the President and Congress to Help Improve
Retirement Security
"Policymakers pave the way for modernizing our retirement system
for current and future generations," said Collinson. The middle
class's top priority for the President and Congress to help people
have a financially secure retirement is addressing Social
Security's funding shortfalls (65%), according to the survey's
findings. Other priorities include addressing Medicare's funding
shortfalls (53%), making out-of-pocket health care expenses and
prescription drugs more affordable (50%), ensuring all workers can
save for retirement in the workplace (47%), implementing financial
literacy curriculum in schools (40%), innovating more affordable
solutions for long-term care (39%), increasing access to affordable
housing (39%), supporting family caregivers (37%), providing and/or
subsidizing additional broadband access (28%), and creating
incentives for continuing education (28%).
"Solving Social Security's funding shortfalls does not have a
clear-cut solution in the eyes of the middle class," said
Collinson. When asked how Congress should address Social Security's
funding shortfall, people in the middle class have mixed opinions
about possible actions including increasing the maximum earnings
subject to payroll taxes (41%), increasing the Social Security
payroll tax rate (37%), preserving retirement benefit payments for
retirees in greatest need (31%), and raising the retirement age
(24%). Twenty-two percent of workers "don't know" what actions
Congress should take. Only 4% say that Congress should "do
nothing."
"Our nation faces a tremendous opportunity to future-proof our
retirement system to help middle-class Americans protect their
health, build wealth, and retire with dignity. Doing so requires a
holistic approach that requires strengthening safety nets and
enhancing the built environment. A collective effort is needed
among policymakers, industry, academics, and individuals and
families to implement lasting solutions," said Collinson.
The Retirement Outlook of the American Middle
Class provides detailed survey findings about the
health and well-being, employment status, personal finances, and
retirement outlook of middle-class U.S. residents aged 18 and
older. The report provides comparative breakdowns by those with an
annual household income (HHI) of $50,000 to $99,999
and $100,000 to $199,999. The report provides recommendations for
individuals, employers, and policymakers. Also, it offers a
suggested reading list to learn more about the middle class.
To download the report,
visit www.transamericainstitute.org. Listen to Transamerica
Institute's podcast ClearPath – Your Roadmap for
LifeSM. Follow on LinkedIn, Facebook, and X
(formerly Twitter) @TI_insights and @TCRStudies.
About Transamerica Center for Retirement
Studies
Transamerica Center for Retirement
Studies® (TCRS) is an operating division of
Transamerica Institute®, a nonprofit, private
foundation. Transamerica Institute is funded by contributions from
Transamerica Life Insurance Company and its affiliates. TCRS and
its representative cannot give ERISA, tax, investment, or legal
advice. This material is provided for informational purposes only
and should not be construed as ERISA, tax, investment, or legal
advice. Interested parties must consult and rely solely upon their
independent advisors regarding their situation and the concepts
presented here. For more information about TCRS, please refer to
www.transamericainstitute.org.
About the 24th Annual Transamerica Retirement
Survey
The analysis contained in The Retirement
Outlook of the American Middle Class was prepared
internally by the research team at Transamerica Institute and TCRS.
The 25-minute online survey was conducted within the U.S. by The
Harris Poll on behalf of Transamerica Institute between September 14 and October 23, 2023, among
a nationally representative sample of 10,002 people including 5,726
with a household income of $50,000 to
$199,999. Data was weighted where
necessary for age by gender, race and ethnicity, region, education,
marital status, household size, household income and propensity to
be online to being them in line with their actual proportions in
the population. Respondents were selected from among those who have
agreed to participate in our surveys. The sampling precision of
Harris online polls is measured by using a Bayesian credible
interval and the worker sample data is accurate to within +1.2
percentage points using a 95% confidence level. This credible
interval will be wider among subsets of the surveyed population of
interest. Percentages are rounded to the nearest whole percent.
Transamerica Center for Retirement Studies®
Media Contact: Kyle Moschen
kmoschen@webershandwick.com
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SOURCE Transamerica Center for Retirement Studies