The FIDx Five: Third Edition

Retirement, Annuity, and Fintech Insights 

In this week's edition, we take a look at concerns within the retirement industry, American's expectations for retirement savings, and how annuities are factoring into retirement plans. 

Savings Expectations
According to a survey done by “GoBankingRates,” 96% of Americans have less than $1 million saved for retirement. To put the $1 million savings mark into perspective, it would take $375 in savings per month starting at age 20 to reach $1 million by the age of 65. Given this reality, it may not be surprising that the overwhelming majority of Americans don’t have $1 million in retirement savings. What is surprising, however, is that more than half of Americans have less than $20,000 saved for retirement. (John Csiszar, June 27th, 2022, 96% of Americans Have Less Than $1 Million Saved For Retirement: How To Avoid Falling Short of the Standard Nest Egg, Link)

Millennials Planning Ahead
Young investors are already looking towards the future and making decisions about their retirement savings options in the face of recent spikes in interest rates, high market volatility, and student loan debt. 63% of Millennials are most concerned about market loss and volatility, which is part of the reason annuities are catching the attention of these young investors. When it comes to saving through annuities specifically, 25% of young investors believe an annuity is a better option for growth opportunities than a savings account. However, only 12% of young investors are aware of tax deferred growth through annuities. (Sarah Boxler, June 1st, 2022, Millennials Are Hungry for Growth and Protection Potential, According to Lincoln Financial Group, Link)

Baby Boomer Concerns
Amidst concerns about the economy, inflation, interest rates, and world issues, the majority of baby boomers are preparing to work throughout retirement. An estimated 70% of seniors are planning on or willing to work in retirement. While there are multiple concerns factoring into this estimation, many seniors are simply forced to work in retirement due to shortcomings in retirement savings. According to Sagewell Financials’ Senior Certainty Index, 27% of seniors have less than $10k saved for retirement. For senior women specifically, 32% have less than $10k saved for retirement. (John Sullivan, June 21st, 2022, Seniors Aren’t Saving: A Third of Woman Have Less Than $10k For Retirement, Link )

Confidence Through Annuities
About 49% of American adults believe they are on track to reach their savings goals for retirement. However, among American adults who are annuity owners, 75% feel they are on track to reach their savings goals for retirement. This is a 26% jump compared to American adults who aren’t annuity holders. Surprisingly, 23% of Americans still don’t know what an annuity is. (Kelly Woerdehoff, June 6th, 2022, Annuity ownership Drives Retirement Savings Confidence, Athene Finds, Link)

Lack of Workplace Plans
Congress is looking to address the lack of access to a workplace plan among low-middle income workers. According to Georgetown University’s Center for Retirement Initiatives, an estimated 57 million U.S. workers have no retirement plan offered through their job. For workers in the bottom 25% of wages, just 42% have access to a workplace plan. In contrast, 88% of workers in the top 25% of wages have access to a workplace plan. Congress is looking to help low-middle income workers achieve their retirement goals by increasing participation in retirement planning. (Sarah O’Brien, June 4th, 2022, There’s a push in Congress for a new national retirement plan to fill big savings gap, Link)

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