Retirement

In addition to present well-being, the SHED also asked questions that probed respondents' assessment of their future well-being, particularly as it pertains to retirement and financial preparations for retirement.

Planning for Retirement

When it comes to planning and saving for retirement, the survey results tell a somewhat cautionary tale. Although the long-term shift from defined-benefit (e.g., pension) to defined-contribution (e.g., 401(k)) plans places significant responsibilities on individuals to plan for their own retirement, only about one-fourth appear to be actively doing so.⁹ Only 11 percent of respondents who are not currently retired report that they have given "a lot" of thought to financial planning for their retirement, while an additional 16 percent have given it "a fair amount" of thought. Nearly half of respondents (49 percent) said that they had thought only "a little" or "none at all" about financial planning for retirement. There is a modest difference in retirement planning by gender, with women being slightly more likely (28 percent) than men (23 percent) to report having given no thought to retirement planning.

As might be expected, the amount of thought given to retirement planning varies considerably by age (table 16). The proportion of those ages 18 to 29 who said they had given no thought at all to retirement planning was the highest of any age group, at 41 percent. However, even those closest to traditional retirement ages show only a modest level of planning: of those age 60 and over, only one-fifth said they had given "a lot" of thought to retirement planning, about the same percentage of that group who said they had given it no thought at all. Income also appears to be related to retirement planning. Of those with six-figure incomes, for instance, 22 percent reported that they had given financial planning for retirement "a lot" of thought, nearly double the rate of the overall population, while only 7 percent of those earning less than $25,000 said the same. This relationship between income and retirement planning is partially driven by respondents with higher incomes being more likely to be older and closer to retirement age. However, even after accounting for age, education, race/ethnicity, and other characteristics, higher income remains a significant predictor of greater planning for retirement.¹⁰

Table 16. How much thought have you given to the financial planning for your retirement? (by age)
Percent, except as noted

	18-29	30-44	45-59	60+	Overall
None at all	40.7	20.7	18.6	19.7	25.2
A little	27.3	26.1	20.1	19.0	23.8
Some	17.6	25.9	24.6	19.3	22.6
A fair amount	7.9	16.1	20.2	20.6	15.7
A lot	4.7	9.7	15.7	20.5	11.4
Total number of respondents	3,163

Note: Among those who are not currently retired.

There are also differences in expectations for retirement among those who have planned for it. Among those who have given at least "some" thought to retirement, only a quarter anticipate that they will experience the traditional notion of retirement, which is working full time until a retirement date and then no longer working at all. Conversely, for just over one-fifth of this group, their "retirement plan" was to keep working as long as possible. An additional 6 percent of those who have thought about retirement do not think they will ever stop working. Many respondents plan to ease out of the labor force, with 16 percent planning to retire from their current career but then find a different part-time job, 10 percent planning to retire and then work for themselves, and an additional 4 percent planning to retire and then find a different full-time job.

The expectations for one's path to retirement vary considerably with age, with the expectation of traditional retirement shrinking as people approach traditional retirement ages (table 17). Thirty-five percent of those ages 18 to 29 reported that they expect to work full time until a set retirement date and then stop working altogether. This percentage declines steadily over the older age cohorts, until only 15 percent of those ages 60 and over expect to work full time until a set retirement date and then stop working altogether. Older respondents were more likely to have reported that they will either gradually reduce the hours they work as they approach retirement, or that they will retire from their current career and then find a part-time job. From this survey alone, it is not possible to know whether these differences reflect a change in desired outcome over time (with older adults perhaps realizing that they want to stay in the workforce longer than younger adults believe they will), an increased understanding of the financial challenges of full retirement, or simply intergenerational differences in attitude about retirement.

Table 17. Which one of the following best describes your plan for retirement? (by age)
Percent, except as noted

	18-29	30-44	45-59	60+	Overall
I do not plan to retire	4.8	6.0	8.0	3.1	6.2
Work fewer hours as I get close to retirement	13.8	9.9	6.1	14.2	9.6
Retire from my current career, but then find a different full-time job	4.5	4.4	4.2	0.2	3.8
Retire from my current career, but then find a different part-time job	14.8	13.2	18.1	16.6	15.8
Retire from my current career, but then work for myself	10.0	10.6	10.4	6.1	9.9
Work full time until I retire, then stop working altogether	34.6	29.2	22.1	14.6	25.5
Keep working as long as possible	15.8	21.6	21.2	28.1	21.3
Other	0.9	3.7	9.8	16.4	7.2
Total number of respondents	1,766

Note: Among those who have given at least some thought to retirement.

Responses to the question about the path to retirement also vary consistently by income, indicating that expectations around retirement are closely linked to financial circumstances. While 35 percent of those earning six figures reported that they intend to work full time until a retirement date and then stop working, only 15 percent of those earning less than $25,000 intend to do so. Similarly, 28 percent of those earning less than $25,000 indicated that they expect to "keep working as long as possible," while only 13 percent of those earning $100,000 or more said the same. Women were also more likely (25 percent) than men (18 percent) to expect to "keep working as long as possible."

For some individuals, a lack of financial planning for retirement may merely reflect a lack of interest in being retired. However, for others, a lack of preparedness for retirement may simply preclude it as an option--or spur difficult decisions in the future for those who do not plan to retire but are unable to stay in the workforce.

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Saving for Retirement

The lack of preparedness is not signaled by a lack of planning alone. Many respondents, particularly those with limited incomes, indicated that they simply have few or no financial resources available for retirement. When asked what types of retirement savings or pension they have, 31 percent of those respondents who aren't yet retired reported that they have no retirement savings or pension whatsoever. For those with resources for retirement, respondents were allowed to indicate all the ways they were saving for retirement. The most commonly reported form of retirement savings is a defined contribution plan, such as a 401(k) or 403(b) plan, which 44 percent of people possess. Over a third (36 percent) of adults reported that they are eligible for Social Security Old-Age benefits, and 18 percent reported that they are covered by a traditional "defined benefit" pension through an employer.¹¹ Almost a quarter (23 percent) reported that they are saving for retirement using an individual retirement account (IRA), and the same proportion are saving for retirement outside of a formal retirement account (23 percent). Eleven percent of respondents indicated that they are saving for retirement utilizing real estate or land investments, which, for some, presumably includes tapping the equity of the home they own.

As with retirement planning, patterns of retirement savings also differ substantially, and predictably, by age (table 18). For nearly every retirement savings category, the percentage of people reporting that they have that type of resource increases steadily with age. There is one notable exception. Holders of defined contribution plans, such as 401(k)s, are most common in the 30-44 age group, with percentages decreasing with older cohorts. This seeming anomaly may be driven by the fact that the most common of these types of plans were not available until the 1980s.

Table 18. What type(s) of retirement savings or pension do you (or your spouse/partner) have? (by age)
Percent, except as noted

	18-29	30-44	45-59	60+	Overall
No retirement savings or pension	50.5	27.8	23.0	15.4	30.9
Social Security Old-Age benefits	17.5	31.5	46.4	67.6	36.3
401(k), 403(b), thrift or other defined contribution pension plan through an employer	30.3	52.8	47.9	37.1	43.7
Defined benefit pension through an employer (i.e., pension based on a formula, your earnings, and years of service)	7.0	16.0	27.0	25.9	18.2
Individual Retirement Account (IRA)	11.2	23.5	29.2	31.9	23.0
Savings outside a retirement account (e.g., a brokerage account, savings account)	15.4	19.3	28.6	33.3	22.7
Real estate or land	4.4	8.9	16.2	20.5	11.3
Other	1.7	3.4	4.1	4.1	3.2
Total number of respondents	3,163

Note: Among those who are not currently retired.

Similarly, nearly two-thirds of those ages 18 to 29 reported that they have no retirement savings or pension (including Social Security). This percentage declines steadily by age cohort. However, while the incidence of retirement savings increases with age, even among those ages 60 and over the percentage with no retirement savings is still striking: 15 percent of respondents in this group who are not yet retired reported having no retirement savings or pension, including Social Security. When Social Security is excluded as a form of retirement "savings," the share of respondents ages 60 and over with no retirement savings rises to 31 percent.

Even when respondents do have established retirement savings accounts, they do not necessarily treat such funds as untouchable. Seven percent of those with retirement savings reported that they had borrowed money from their retirement account during the preceding 12 months. Moreover, 5 percent of those with such accounts reported that they had cashed out some of their retirement savings in the prior 12 months. (See box 2 for more on the interrelationship between retirement savings and other resources.)

In addition to the differences by age in the types of retirement savings currently held, there are also differences in the expected approaches to paying for retirement. When it comes to Social Security, there are marked differences in expectations about coverage (table 19). Only 20 percent of those under age 30 reported that they anticipate that Social Security (technically, Social Security "Old-Age") benefits will be part of their plan to pay for expenses in retirement. This percentage steadily increased by age cohort, until 74 percent of those over age 60 reported expecting to include Social Security in their retirement plans. It is unclear whether these differences simply highlight the fact that older adults are likely to be thinking more actively about Social Security or represent diminishing levels of confidence among younger people about the future availability of Social Security benefits. Similarly, traditional defined-benefits pension plans are less common as an expected source of retirement funding among younger respondents. Twenty-nine percent of those ages 60 and older are counting on income from a defined-benefit pension, while only 7 percent of those ages 18 to 29 plan to pay for expenses using a defined-benefit pension.

Table 19. How are you (and your spouse/partner) planning to pay for your expenses in retirement? (by age)
Percent, except as noted

	18-29	30-44	45-59	60+	Overall
Social Security Old-Age benefits	20.4	41.4	58.4	74.2	44.6
I will continue working	18.7	24.5	24.5	30.0	23.5
Spouse/partner will continue working	6.4	8.9	11.2	7.2	8.8
Defined benefit pension from work (i.e., pension based on a formula, your earnings, and years of service)	7.3	16.1	26.8	29.0	18.5
401(k), 403(b), thrift or other defined contribution pension plan from work	31.6	46.0	43.5	30.2	39.7
Individual Retirement Account (IRA)	14.1	22.5	26.3	28.6	22.1
Savings outside a retirement account (e.g., a brokerage account, savings account)	19.3	23.3	24.9	29.2	23.4
Income from real estate or the sale of real estate	6.1	7.1	10.4	11.0	8.3
Income from a business or the sale of a business	4.6	3.7	3.1	4.5	3.9
Rely on children, grandchildren, or other family	4.6	1.9	2.6	1.7	2.8
I don't know	40.7	24.8	16.2	8.7	24.6
Other	1.1	2.4	4.8	5.6	3.1
Total number of respondents	3,051

Note: Among those who are not currently retired.

Continued employment is expected to be a significant source of retirement income, as 24 percent of all respondents expect that they will continue working in some capacity to cover their expenses, and 9 percent expect their spouse to continue working. Just over 23 percent of people plan to rely on savings they hold outside formal retirement accounts to cover their expenses, while 22 percent plan to rely on their IRAs. Only a relatively small fraction of respondents plan to use income from real estate, the sale of a business, or help from family members in retirement. Perhaps as telling a number as any other is the following: when asked this question about how they and their spouse will pay for expenses in retirement, one-fourth of all respondents--and 14 percent of those ages 45 and older--chose "I don't know."

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The Decision to Retire and Experiences in Retirement

The Great Recession appears to have adversely affected the retirement plans of a significant portion of the U.S. adult population. The respondents who had not retired and had given at least "some" thought to retirement were asked about their current retirement plans versus their retirement plans prior to 2008. One-third reported that they plan to retire at the same age as they had planned prior to 2008. A similar number (36 percent) said they now planned to retire at a later age than before the recession. This percentage was higher for those closest to traditional retirement ages: 41 percent of those ages 45 and over reported that they now planned to retire at a later date than they had before 2008. Only 5 percent of respondents who gave at least "some" thought to retirement now plan to retire sooner than they had prior to 2008, and almost a quarter reported that they were not thinking about retirement prior to 2008 and, thus, do not have a point of comparison.

As with other retirement expectations, there was variation across income groups in how the recession affected planned retirement age. As a group, those earning over $100,000 appeared to be relatively more insulated from the recession than other groups: 49 percent reported that their retirement age had not changed, relative to 33 percent of all respondents.

Those survey respondents who identified themselves as being currently retired were asked about their experiences in retirement and about how they manage their expenses. In terms of their path to retirement, a clear majority (58 percent) reported that they had followed the traditional model of working full time until they retired, and then stopped working altogether. (This is more than double the percent of the non-retired reporting that this is the path they expected to follow.) However, many others followed less traditional paths. Fifteen percent had eased into retirement, working fewer hours as they approached their retirement date. Others continued to work at some point after retirement. Six percent had retired from their previous career but later worked a full-time job, and 14 percent worked at a part-time job. Eight percent had retired from their previous career but then started working as self-employed. Women were more likely than men (18 percent versus 13 percent) to have reduced their hours leading up to retirement and were less likely than men to work after retirement, either full time (4 percent versus 9 percent), part time (11 percent versus 17 percent), or for themselves (6 percent versus 11 percent).

When it came to expenses, nearly three-quarters (74 percent) of those in retirement were drawing Social Security benefits (table 20). Forty-four percent were drawing a traditional defined benefit pension. Nearly a third drew on savings outside a retirement account, 29 percent used savings from an IRA, and 18 percent drew on a defined contribution plan. Nine percent used income from real estate or the sale of real estate to fund expenses in retirement, and 6 percent currently earned wages from a job. Only 2 percent reported relying on children, grandchildren, or other family members to pay for their expenses. Generally, the sources of funds were similar in retirement for men and women, with no significant differences by gender. The one exception is that men (15 percent) were two-thirds more likely than women (9 percent) to report relying on income from a spouse's job.

Table 20. What sources are you (and your spouse/partner) using to pay for your expenses in retirement?
Percent, except as noted

	Yes	No
Social Security Old-Age benefits	74.5	25.5
I have a job	5.8	94.2
My spouse/partner has a job	11.9	88.1
Defined benefit pension from work (i.e., pension based on a formula, your earnings, and years of service)	44.3	55.7
401(k), 403(b), thrift or other defined contribution pension plan from work	18.5	81.5
Individual Retirement Account (IRA)	28.8	71.2
Savings outside a retirement account (e.g., a brokerage account, savings account)	31.6	68.4
Income from real estate or the sale of real estate	8.8	91.2
Income from a business or the sale of a business	2.6	97.4
Relying on children, grandchildren, or other family	1.9	98.1
Other	5.9	94.1
Total number of respondents	971

Note: Among those who are currently retired.

About one-third of retirees had retired since 2008. For the vast majority of this group--80 percent--the Great Recession had no effect on their decision to retire. Of the rest of those who retired since 2008, only 4 percent reported that the recession led to them retiring later than they had planned, while 15 percent reported that they had actually retired earlier than planned due to the recession.

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References

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