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Too many consumers are headed for a financial crisis in retirement. Recent studies indicate that the typical American worker has no retirement savings, and 40% of those already in retirement rely solely on Social Security. However, among the 926 people who took Consumer Action’s recent online Retirement Savings Survey, the picture was rosier: The vast majority (82%) of those who participated said they have been saving for retirement. (The survey was conducted using the online surveying tool SurveyMonkey Feb. 4-12, 2020, prior to the coronavirus outbreak and the resulting turbulence in financial markets worldwide.)

Click here to see survey data.

• Close to two-thirds (62.4%) say they’ve saved funds through an employer-sponsored retirement plan, such as a 401(k), 403(b), 457 Plan, SEP-IRA, SIMPLE IRA, etc.
• Half (50.5%) said they have stashed savings in an individual retirement account (IRA), and more than one-third (38%) report having retirement funds available because of a pension plan.
• When asked at that point about their confidence level based on their retirement savings so far, 53.5% of those surveyed said they feel that they will have enough for retirement.
• Survey respondents skewed older, with 83% stating they were age 51 and above and a full 40% saying they were between 61-70.

“We are relieved to learn that so many of the consumers we reached were not alarmed about their financial future, although we are concerned about the survey takers who told us that conditions beyond their control, such as poor health, disability and limited income, have forced them to delay or ignore saving money for their senior years,” said Linda Sherry, Consumer Action’s director of national priorities. “However, it must be noted that our survey captured investor sentiment at its height, and now that we find ourselves in financial crisis caused by the COVID-19 outbreak, survey takers’ outlook probably has deteriorated, and the vulnerable are even more exposed to financial hardship.”

Obstacles to saving

In open-ended questions, a number of respondents told Consumer Action that they were forced to retire early due to a medical problem or disability. According to the Employee Benefit Research Institute, about 43% of retirees retire earlier than they expect. Other consumers told us they worry about the effect unexpected future medical costs could have on their retirement plans.

Nearly half of respondents (45%) told Consumer Action that they don’t earn enough to save. Another 32% said they have non-mortgage debt that takes precedence over retirement savings; 15% identified their non-mortgage debts as being student loans. Others left comments saying that saving for retirement has had to take a back seat to funding college tuition; paying for home repairs; or helping support adult children, grandchildren and parents. Still others admit to not prioritizing retirement savings or to starting too late in life.

Finding a way forward

In its latest issue of Consumer Action News—Retirement Savings—the non-profit reports on the life-long financial gains for those who can afford to wait until age 70 to claim Social Security benefits. Beneficiaries who reach full retirement age at 67 and delay receiving payment until 70 would get an extra 24% each month for the rest of their lives. (Read the story.)

Consumer Action reports on efforts being made nationally, and in some states, to help prevent those headed toward retirement from falling into financial crisis. In late 2019, Congress passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act to, among other things, encourage small businesses to automatically enroll employees in a company retirement savings plan and allow part-time employees to participate in their employer's 401(k) plan.

A growing number of states are implementing programs that require small to mid-size employers without retirement plans to facilitate employee participation in their state's automated savings plan. California, Connecticut, Illinois, Maryland, New Jersey and Oregon have these mandated programs. (Read the story.)

For tips on how to avoid retirement pitfalls, and a rundown on retirement savings options for the self-employed, see Consumer Action’s Retirement Savings issue.

Through education and advocacy, Consumer Action fights for strong consumer rights and policies that promote fairness and financial prosperity for underrepresented consumers nationwide. We prohibit use of our survey findings for any commercial purpose.