SECURE 2.0: Americans' retirement perceptions at the cusp of change

The new legislation is a significant step toward making retirement plans accessible to 57 million more people, similarly to the launch of automatic enrollment In the UK a decade ago, says Smart's global retirement report.

By Jodan Ledford | BenefitsPro

May 09, 2023

 

Retirement is a complex topic, with many Americans concerned about how they will be able to fund their later years. Compared to other developed countries, retirement plan coverage in the US has often been behind the curve, with a reliance on the voluntary offering of retirement plans. Ask people what they think about retirement and their responses will reflect their circumstances.

In late 2022, Smart surveyed over 8,000 savers across the US, UK, Australia, and South Africa about their understanding and concerns around retirement. Taking those collective responses, Smart created the Future of Global Retirement report, which identifies common trends, as well as areas where the retirement landscape differs vastly.

 

The Future of Global Retirement report shows that cost of living is a big concern for Americans looking ahead to their retirement years. 57% expressed concerns about making ends meet – an increase of 16% year-over-year. Furthermore, 58% of respondents specifically cite affordability of medical bills as their top concern. In general, concerns over adequate income in retirement increase as savers get closer to retirement.  In particular, the increase in inflation from the prior report seemed to weigh heavy with respect to affordability, especially in the face of any potential recession.

Whether it’s because of a short-term rise in cost of living, or longer-term changes in working patterns, Americans increasingly view retirement as a gradual process rather than a one-off event, with 35% planning to keep working through retirement to fund their later years. In this regard, the US is starting to follow other countries: in Australia, the UK, and South Africa, around half of savers believe they will have to continue working during retirement. Therefore, it is increasingly important for Americans to have retirement plans that are flexible enough to accommodate different working arrangements and income sources.

 

We also found that savers want more control over their money, and feel they need more support. Crucially, fewer than a quarter of US respondents wish to manage their finances completely by themselves. Over half prefer a blended approach, where they manage their own money, but can also rely on support to help make the right decisions. In fact, 60% of Americans expect to get advice from a financial adviser and 51% from a retirement plan provider. By contrast, British savers feel less confident in their knowledge of their retirement options, but are also less inclined to seek advice for managing their savings.

There is a clear demand for plan providers to offer assistance that savers can trust and depend on for their retirement years. But much like respondents from around the world, American savers feel like they aren’t getting what they want from their retirement plans. In fact, even though over half of respondents say that they expect to get advice from their plan provider, just 17% say that they receive their most useful advice from them.

 

Our survey provides a snapshot of people’s perceptions here and now. The SECURE 2.0 Act, however, stands to change these over time. Signed into law in December, this significant piece of legislation aims to expand retirement plan coverage at the federal level. Among the 92 provisions, the Act mandates automatic enrollment of employees in new 401(k) or 403(b) plans with a contribution rate of at least 3%, increasing by 1% per year until it reaches 10%. This change, effective in 2025, will…READ MORE

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