If retirees could talk to their younger selves, they would tell them to save more for their golden years.
“We’re thinking about the regret most of our survey respondents had that they didn’t start saving early enough,” Nate Miles, head of retirement at Allspring, told Yahoo Finance Live of the company’s most recent global investment survey of 2,758 adults in the world near and retired.
Many of Allspring’s respondents are therefore considering semi-retirement.
“About 25% of them are reconciled to either working later and retiring later and/or simply expecting less in retirement,” Miles said.
But that’s not always a viable option, according to survey results. One in 4 early retirees unexpectedly took early retirement due to job loss and health issues.
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Instead, workers should focus on saving, Miles said.
He recommends workers save at least 10% of their income for retirement. Workers can even make up for lost time by starting to save for retirement later in their careers. It just means consistently socking away more.
“One of the things that worried us about the survey was that people who didn’t start saving until after 40 only saved 50% of the time at a rate of about 10%,” Miles said. “Even if people save later, they don’t really make up for that 10 or 20 years in terms of that delayed start date.”
Employers can also play a role by helping workers meet their retirement goals through auto-enrollment plans. That’s when workers are automatically added to their company’s 401(k) when they start. Some employers also offer annual automatic premium increases.
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Studies have found that employers with auto-enrollment pension plans have much higher employee participation rates.
“The majority of participants either lack the commitment or financial literacy to often make the best decisions for them. So things like auto-enrollment and auto-escalation will help solve some of those issues on their behalf,” Mile said. “And we see more and more plans adding this. With the recent passage of SECURE 2.0, we expect even more participants in employer-sponsored plans will do so.”
The story goes on
Automatic enrollment could also help women who are more concerned about reaching their retirement goals, Miles said. The Allspring survey found that 69% of women are confident their savings will last into retirement, compared to 87% of men.
“In general, women have less confidence in retirement and are generally more anxious. Part of that is that they’re often not in the workforce their entire careers and therefore don’t benefit from that time in savings,” Miles said. “This is an area where the [auto-enrollment plans] will really help where we’re going to get more and more women to actually save longer for retirement.”
Ella Vincent is the personal finance reporter for Yahoo Finance. Follow her on Twitter @bookgirlchicago
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