Survey: More than half of American workers say they’re behind on retirement savings

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More than half of American workers say they’re behind on retirement savings, according to a just-released Bankrate survey. Worse, the accounts of many have been moving in the wrong direction, as workers take early withdrawals from retirement plans due to the Covid pandemic.

The survey shows that a full 52 percent of American workers say their retirement savings are not where they need to be. A further 16 percent are not sure whether they’re on track, while 21 percent say they’re where they need to be. Only 11 percent said they were ahead of plan.

Americans have raided their retirement accounts to stay afloat, too. Of those with accounts such as a 401(k) plan or individual retirement account (IRA), 51 percent have taken an early withdrawal, including 20 percent who have taken one since the pandemic began in early 2020, according to the Bankrate survey.

“Saving for both emergencies and retirement are vitally important to current and future financial security,” says Greg McBride, CFA, Bankrate chief financial analyst. “Even a modest emergency fund acts as a buffer from early retirement account withdrawals when unplanned expenses arise, allowing the power of compounding to continue to work its magic.”

Bankrate surveyed 2,225 American adults about their retirement savings. Below are the top findings.

Key takeaways:

More than half of American workers say they’re behind on retirement savings

The Bankrate survey shows that most working Americans believe their retirement savings are behind where they need to be:

  • A full 52 percent said they are behind on retirement savings.
  • More than 21 percent said they are right on track.
  • Almost 16 percent said they don’t know where they stand.
  • Just 11 percent said they were ahead of the game.

About 63 percent of American workers are saving as much or more than they were before the pandemic

Despite the dour numbers of Americans admitting to being behind schedule, many workers say they’ve been saving as much or more since the pandemic began. Here’s how the numbers break down:

  • Almost 39 percent said they’re saving about the same amount for retirement as before the pandemic.
  • More than 24 percent said they’re saving more now than they did before.
  • Nearly 14 percent said they’re saving less for retirement than before.
  • Around 23 percent said they weren’t contributing before or now.

The reasons for saving less varied, but lack of income was the largest. Respondents could choose more than one answer in the survey, and here are the most cited reasons for why workers are saving less now:

  • Loss of income (49 percent)
  • Additional expenses (32 percent)
  • Additional debt (21 percent)
  • Wanting to keep more cash on hand (19 percent)
  • Helping other adult family members financially (14 percent)
  • 9 percent said none of these
  • 5 percent pointed to some other reason

Workers in all age categories are contributing more toward retirement now than pre-pandemic rather than less. Tops among them are millennials and Generation Z:

  • Millennials: 28 percent are contributing more than before the pandemic and 14 percent are contributing less.
  • Generation Z: 27 percent are saving more and just 12 percent are saving less.
  • Generation X: 22 percent are contributing more and 14 percent less.
  • Baby boomers: 20 percent are saving more and 13 percent less.

By gender, men (30 percent) are more likely than women (18 percent) to be contributing more to their retirement accounts now than before the pandemic.

More than one-third of Americans don’t have a retirement account

Surprisingly, nearly 36 percent of American workers said they’ve never had a retirement account such as a 401(k) or IRA, according to the survey.

Two of the biggest groups to say they’ve never had a retirement account were lower-income households and Generation Z:

  • Nearly 50 percent of those with annual income of less than $50,000 said they’ve never had a retirement account.
  • Almost 54 percent of Generation Z confess they’ve never opened a retirement account.

While an employer may not offer a retirement plan such as a 401(k), workers with income (or even a spouse who has earned income) can open an IRA.

51 percent of Americans have taken an early withdrawal

More than half of American workers say they’ve taken an early withdrawal from a retirement account. Of those who have a retirement account or had one, more than 51 percent have taken an early withdrawal, including:

  • 31 percent who did so before the pandemic
  • 12 percent who have done so during the pandemic
  • 8 percent who took an early withdrawal both before and during the pandemic

In total, nearly 20 percent of Americans with retirement accounts have taken an early withdrawal from a retirement account since the full onset of the pandemic in the U.S struck in March 2020. This elevated level illustrates the ongoing financial toll and the potential future costs of the pandemic.

About 49 percent of those with a retirement plan have never taken a pre-retirement distribution.

With typical retirement accounts such as traditional and Roth IRA plans, you can contribute only during a specific window of time. Once that time is up, you can’t contribute or replace the funds.

“While Roth IRA contributions – not earnings, just contributions – can be withdrawn at any time for any reason without taxes or penalties, this is a one-way street,” says McBride. “The money comes out, but you don’t get to make larger contributions in later years to replace that money. It is a permanent setback to your retirement planning.”

Before the pandemic, younger workers were the least likely age group to have taken early withdrawals, but the pandemic has shifted that dramatically. Here’s how the numbers stack up:

  • Generation Z: Before the pandemic, just 18 percent of this group had taken an early withdrawal, compared with 40 percent who took their first withdrawal during or after March 2020.
  • Millennials: About 29 percent of this group had taken an early withdrawal before the pandemic, compared with 19 percent taking their first withdrawal since the pandemic.
  • Generation X: About 34 percent had taken an early withdrawal before the pandemic, compared with just 12 percent taking their first distribution since then.
  • Baby boomers: Around 34 percent had taken an early withdrawal pre-pandemic, while just 6 percent made their first withdrawal since the pandemic emerged.

If you factor in the small percentage of each age group that had taken withdrawals both before and during the pandemic, then suddenly Generation Z has the lowest likelihood to have kept their retirement accounts untouched:

  • Just 38 percent of Generation Z workers with a retirement account hadn’t tapped it.
  • About 46 percent of millennials with a retirement account hadn’t hit up their account.
  • Around 48 percent of Generation X had not raided a retirement account.
  • About 52 percent of baby boomers had not taken an early withdrawal.

And while income did play a factor in whether a household took an early distribution, it might be smaller than you would have expected.

Just 43 percent of households with a retirement account and income less than $50,000 have never taken a pre-retirement withdrawal. That compares with just over half of those earning $50,000-$99,999 (52 percent) and those earning $100,000 or more (51 percent).

Older generations were more likely to feel behind on retirement savings

While younger generations may have been more likely to tap their retirement savings early, it was older generations that were more likely to say they were behind on retirement savings:

  • Nearly 60 percent of Generation X said they were behind.
  • More than 56 percent of baby boomers said they felt behind schedule.
  • More than 49 percent of millennials said they were behind plan.
  • Just 33 percent of Generation Z said they had fallen behind.

In fact, millennials (15 percent) and Generation Z (12 percent) were the most likely to say they were ahead of plan, compared with Generation X (9 percent) and baby boomers (6 percent).

Among those who said they were right on track, the difference between age groups was minimal, ranging from 19 percent of Generation X to 24 percent of Generation Z.

For older generations feeling behind, those over age 50 are entitled to make catch-up contributions in both an IRA or an employer-sponsored plan such as a 401(k). The IRA allows catch-up contributions an extra $1,000 a year, while a 401(k) allows an extra $6,500 annually.

Lower-income households were more likely to say they’re behind, but higher-income households weren’t much better

It wasn’t especially surprising that the Bankrate survey found that lower-income households thought they were further behind in their retirement savings than higher-income households. But what was surprising was just how close the groups were in terms of being behind.

  • More than half of households earning less than $100,000 annually are behind on savings, including 58 percent earning less than $50,000 and 52 percent earning $50,000-$99,999.
  • But even 46 percent of households earning at least $100,000 annually claim to be behind where they should be.

But when it came to households that were on track or ahead of schedule, higher-income groups were more likely to number among them. For example:

  • Of households earning less than $50,000, only 12 percent think they are right on track.
  • Of those earning $50,000-$99,999, about 27 percent say they’re on track.
  • Of households earning $100,000 or more, about 29 percent say they’re right on track.

And the results are similarly skewed for households that reported being ahead of schedule:

  • Just 8 percent of households earning less than $50,000 say they’re ahead of schedule.
  • About 10 percent of those earning $50,000-$99,999 say they’re ahead of plan.
  • But a much larger 19 percent of those earning more than $100,000 say they’re ahead of schedule.

And the survey also showed that higher-earning households were more likely to have stepped up their contributions since the pandemic started:

  • Among households earning less than $50,000, 18 percent are contributing more now than before, and 18 percent are contributing less.
  • For households earning $50,000-$99,999, about 24 percent are contributing more and 11 percent less.
  • For households earning $100,000 or more, about 37 percent are contributing more to retirement now than prior to the pandemic, and 11 percent are contributing less.

Methodology

This study was conducted for Bankrate via phone interview by YouGov. Interviews were conducted from October 20-22, 2021, among a sample of 2,225 American adults. Data are weighted and are intended to be representative of all U.S. adults, and therefore are subject to statistical errors typically associated with sample-based information.

Written by
James Royal
Senior investing and wealth management reporter
Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.
Edited by
Senior wealth editor