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Photo of Frank O'Connor, IRI Vice President, Research

Frank O’Connor
Vice President, Research

As the workforce continues to evolve, concerns about retirement savings have reached a critical juncture. A recent Insured Retirement Institute research brief highlights a significant disparity between workers’ expectations and the reality of their retirement funds. The study focuses on Generation X (those in their peak earning years), working Baby Boomers, and retirees, shedding light on the insufficiency of average retirement savings and the misperceptions surrounding retirement income.

Insufficient Retirement Savings
Our report found that the average retirement savings of Generation X and near-retirement Baby Boomers are simply inadequate to support their income expectations during retirement. The findings suggest that only a relatively few individuals anticipate receiving income from a public or private pension, further compounding the issue.

This means that the burden of retirement funding primarily falls on:

  • personal savings
  • investment strategies
  • inheritance
  • tapping into home equity, either through the sale of a primary or secondary residence or a reverse mortgage

Misunderstanding of Defined Contribution Plans
One striking revelation from the report is the potential misunderstanding of defined contribution plans among workers.

  • Defined contribution plans, such as 401(k) accounts, may often be confused or equated with traditional pensions (defined benefit plans).
  • While only 16 percent of private sector workers have access to a defined benefit plan, a significant portion of both Baby Boomers and Generation X perhaps mistakenly believe they will receive pension income, as 27 percent and 23 percent, respectively, indicated in the survey that they expect such income.

 Addressing the Issues
Industry leaders, employers, and policymakers can take proactive steps to mitigate the potential negative impacts of the retirement crisis.

  • Education and awareness campaigns help workers better understand the distinctions between defined contribution plans and pensions.
  • Clear and transparent communication regarding retirement options ensures individuals can make informed decisions about their financial futures.
  • Policymakers and employers can work together to develop comprehensive retirement savings programs. Enacting policies encouraging employers to offer retirement plans, facilitate automatic enrollment, and promote matching contributions can significantly boost workers’ savings.
  • Exploring alternatives, such as expanded access to retirement plans for gig workers or exploring new retirement models, can help alleviate the pressure on individuals to rely solely on personal savings.

Our research brief highlights the pressing need to address the growing retirement crisis. With insufficient average retirement savings, lofty expectations, and the potential to misunderstand retirement plans, workers face a challenging future.

By raising awareness, providing education, and implementing comprehensive retirement savings initiatives, we can work towards securing a more stable and comfortable retirement for individuals across generations. It is crucial that individuals, industry, employers, and policymakers come together to act and shape a more sustainable retirement landscape for all Americans.

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