Current workers over age 50 no longer think their 401(k) will propel them to a secure retirement. Most older employees expect Social Security to provide over a third (35 percent) of their retirement income. They are counting on their 401(k) to supply only a quarter (26 percent) of their retirement funding, according to a recent Mercer survey.
Younger workers, however, report that their 401(k) will eventually hold enough to finance 39 percent of their retirement expenses. They expect Social Security to pay for just 20 percent of their retirement costs. The survey of 1,502 workers currently contributing to a 401(k) plan or who have a 401(k) balance of $1,000 or more with their current employer found that older and younger workers have similar feelings about other sources of retirement income including IRAs, continued employment, and annuities.
Workers are beginning to lower their expectations about how much of their current income they will be able to replace in retirement. Employees over 50 are currently aiming to replace only 62 percent of their working income in retirement, down from 69 percent in 2007. And only 29 percent of the older workers say they feel confident about meeting this more modest target, compared to 37 percent who thought they could reach their more ambitious retirement goal in previous years. Younger workers are feeling more optimistic about their investment portfolio. They expect to be able to save enough to replace 83 percent of their salary in retirement, down only slightly from 85 percent in 2007.
Employees between the ages of 50 and 64 say they have a variety of regrets about their previous 401(k) participation including wishing they had paid closer attention to their account (31 percent), rebalanced more often (26 percent), and had chosen more diversified investments (19 percent). If they could start their investment life over again, 17 percent of those on the verge of retirement would choose less risky investments, even if it means lower returns.
The proportion of older workers who say they are losing sleep over saving enough for retirement has jumped 11 points to 29 percent since 2008. Most older workers think they don’t have enough time to build a significant nest egg. Less than half (41 percent) of older retirement savers say they have time to catch up on their 401(k) contributions before they retire. Over half of workers age 50 or over (54 percent) have considered delaying retirement.
The average worker over 50 plans to contribute $7,431 to a 401(k) this year, down about $100 since 2008. Younger workers are aiming to contribute $6,051 over the next 12 months. Only 8 percent of all employees plan to completely max out their 401(k), down from 11 percent last year. The proportion of 401(k) participants expecting an employer match has decreased from 87 percent in 2008 to 81 percent this year.