Survey Shows Income a Major Retirement Concern

With approximately 11,200 Americans set to turn age 65 each day¹, American Century Investment’s 11th annual retirement survey asked savers about income in retirement and how they are handling the prospect of replacing their income after their last paychecks. The survey of 1,500 American retirement plan participants ages 25-65 reveals attitudes and apprehensions on retirement income as the share of non-retirees with a defined benefit pension is 30 points lower than the share of retirees with a defined benefit pension.² The 11^th survey of its kind from American Century, the $258 billion* global asset manager, this year’s survey also includes more than 500 plan sponsors.

Retirement income is the new conversation

While two in three are confident (very or somewhat) they know how much to withdraw to cover living expenses, the survey found some clear misunderstandings about retirement income. Only 1 in 10 correctly estimated the 70% to 80% income replacement rate that experts recommend to maintain their same standard of living. And despite their confidence in their ability to know how much to withdraw to cover living expenses, 87% believe they will need some level of help withdrawing money from their retirement accounts.

“Everybody wants retirement income, but creating an income plan when nearing retirement can feel like a mystery. Savers need more education and advice on truly setting up an income replacement plan for retirement, because a retirement plan without an income replacement goal is just a savings account,” said Glenn Dial, vice president, Retirement Thought Leadership and Research for American Century.

The idea of “protected” retirement income and options within retirement plans that generate guaranteed income is a conversation changer for savers, employers with workplace retirement plans and retirement advisors alike. The survey found 92% of people would be interested in using a portion of their retirement plans at work to generate guaranteed lifetime income, with 25% saying they are extremely interested. Protecting the value of their entire savings account in the event of a stock market crash is very or extremely important to 3 in 4 respondents, even if they have to pay “a little more” to protect it. But most still want control over their account during the income phase, such as the option to change or opt out later, all while maintaining the ability to grow their income during retirement to keep pace with inflation.

Saving for retirement is still number one and comes with multiple concerns

Retirement continues to be people’s most important financial obligation, regardless of age, gender or income. 74% cite retirement savings as a major financial obligation, and all are at least a little worried about financing retirement. Other priorities include housing, monthly credit card bills and health care expenses. Credit card and student loan debt cause a lot of worry for about a third of people surveyed.

Most people feel they didn’t save enough for retirement in their 20s, but by the time they are saving for retirement in their 40s and 50s, they believe they are saving enough. People were most confident that they were saving enough for retirement in their 50s and 60s.

“Do some homework to find out if you’re saving enough for what you’ll need in retirement. If you aren’t saving yet, start now—even small amounts can make a difference,” said Dial. “If you’re within five to 10 years from retirement, start thinking about how much income you’ll need in retirement and take steps to plan now. You can develop a retirement income plan on your own, or you may consider talking to an advisor.”

Most savers embrace some level of investment risk to get the returns they may need, with 7 in 10 at least somewhat accepting of market risk. Inflation and interest rate risks are still top concerns, with 6 in 10 highly concerned. Meanwhile, market risk is seen as less of a risk than last year. However, people closer to retirement worry more about investing for longevity so their retirement savings last and market volatility.

Employers want to help

Some 94% feel responsible for helping employees save for and spend down their retirement, and 80% want employees to keep their assets in their plan. Nearly all agree it’s important to provide features that allow employees to turn their balance into a reliable income stream when it’s time to retire. “While employers are torn, over half would prefer to have guaranteed income as the default,” said Dial.

Surprisingly, 62% of American workers believe their target date funds provide income when they retire and 36% believe they are guaranteed to not lose money. Almost half of employees within 5 years of retirement find a loss of only 10% or less is acceptable and almost all are interested in guaranteed lifetime income. “This points to a clear disconnect between what employees expect in their 401(k) plan versus what is selected for them by most employers,” said Dial.

American Century Investments has retirement resources for savers, no matter where they are on the journey. To talk to someone about retirement plans, call American Century at 800-345-2021.

Survey Methodology

The participant survey was conducted between June 11- 27, 2024. Survey included 1,505 full-time workers between the ages of 25 and 65 saving through their employer’s retirement plan. The data were weighted to reflect key demographics (gender, income, and education) among all American private sector participants between 25 and 65. The sponsor survey was conducted between June 10- 26, 2024. Survey included 500 plan sponsor representatives holding a job title of Director or higher, and having considerable influence when it comes to making decisions about their company’s retirement plan (either 401(k), 403(b), or 457 plans). The data were weighted to reflect the makeup of the total defined contribution population by plan asset size. Greenwald Research of Washington, D.C., completed data collection and analysis.