Most Americans Aren’t Confident about Retirement

As millions of Americans approach retirement, they’re starting to take a line right out of Star Wars: “I’ve got a bad feeling about this.”

Retirement is meant to be relaxing, but planning for it is causing growing anxiety. Only 6 in 10 Americans feel financially secure about retirement, according to Allspring’s latest study — a 15% drop from 2023. Women, near-retirees, and younger retirees reported the largest declines, underscoring the need for more personalized planning and financial education.

Those with financial advisors are generally wealthier, healthier and more informed. But for those relying solely on workplace retirement programs or Social Security, planning is trickier. “There is certainly education,” said Nate Miles, head of global client strategy at Allspring. “The question is how much of it is consumed and whether it’s personalized enough to help individuals make optimal decisions.”

Late for Class

A major problem is that many Americans just don’t know what they don’t know:

• Most near-retirees are unaware that delaying Social Security from age 62 to 70 can boost monthly benefits by nearly 80%.
• That’s troubling since Social Security accounts for about 40% of retirees’ income.

“Social Security has been, and will continue to be, a key pillar of retirement income,” Miles told Advisor Upside. “At the same time, good planning over a 30- to 40-year working career should help lessen the significance of the role it plays for future retirees.”

Tax strategy is another weak spot: Only one in five retirees use a tax-efficient withdrawal plan, and about the same have no strategy. While taxes are automatic for W-2 employees, retirees face multiple income streams and must decide how to withdraw funds efficiently. Many lack the knowledge to minimize taxes, making this an area where advisors can provide meaningful value, Miles said.

Off Target. One thing Americans do know is that flexibility matters. Some 84% of near-retirees prefer investment options beyond target-date funds, which are suitable for younger investors, but too simplistic for those nearing the end of their careers. To meet evolving needs, Allspring said defined contribution plans should offer more income-focused options, including core active bond strategies.