Retire at 65? No, age 74 is more ‘realistic,’ say nearly half of Americans

Employees may want to retire at 65, but they need to keep working, according to a new Equitable survey of 1,000 consumers.  In fact, nearly half (47%) say it is unrealistic that they will retire at age 65 and most likely that they will retire nearly a decade later at age 74 – a more attainable goal to reach retirement.

Inflation and diminished trust in traditional safeguards play a huge role driving this new retirement attitude, according to Equitable, a leading financial services organization: “Today’s world is full of uncertainty, and inflation continues to make everything more expensive. This is having a profound impact on Americans’ retirement confidence, causing many to feel they will need to work well beyond age 65 to save enough — not out of choice, but rather necessity,” said Nick Lane, President of Equitable.

“While everyone has a different financial situation and vision for retirement, a financial professional can help develop a plan that keeps you on track. The ultimate goal is to retire on your own timetable, when it makes sense personally and professionally,” he said.

Baby boomers, the generation closest to retirement, are the least interested in the security of a steady paycheck in retirement compared to younger workers. Most baby boomers are more likely to already have access to reliable sources of retirement income — such as payments from Social Security or a traditional pension, the survey said. Younger generations face more uncertainty in these areas and will likely need greater support to ensure they don’t outlive their savings in the future.

“Automatic enrollment, automatic escalation and target-date funds have been game changers in helping more Americans accumulate retirement savings. However, what’s often overlooked is how to help workers convert their savings into a reliable stream of income in retirement,” said Lane. “With the disappearance of traditional pension plans, the burden has shifted to individuals — especially younger generations — to seek the education, guidance and solutions to ensure their savings last throughout retirement.”

Equitable’s survey also revealed that more than half (57%) of Americans view the current economic conditions in the U.S. as highly volatile. The top five financial challenges/obstacles cited in the survey were:

• increasing living expenses (68%)
• fear of not having enough money saved (66%)
• a lack of guaranteed income for retirement (39%)
• anticipated medical expenses (24%)
• lack of access to workplace retirement plans (21%)

Because of these factors, Equitable’s survey found that if given the choice, nearly two-thirds of consumers (64%) would prefer a consistent and guaranteed paycheck in retirement versus having to determine how much to withdraw from their retirement accounts to make their money last throughout their lifetime. This sentiment was generally consistent across all age groups, with millennials expressing the most interest at 70%, followed by Gen X (65%), Gen Z (62%) and baby boomers (59%).

“By 2050, the U.S. is projected to have a retirement gap of $137 trillion, by far the largest among developed countries,” said Keith Namiot, Head of Institutional Markets, Equitable. “We are committed to helping close the retirement gap and helping people live long and fulfilling lives. Guaranteed income in workplace retirement plans can be an important part of achieving those goals. The passage of the SECURE Act in 2020 and SECURE 2.0 in 2022 will fuel the growth of guaranteed income options in retirement plans over time.

“We are proud to work with a select group of asset managers to bring secure lifetime income products to the 401(k) market. We are veterans in this space – in 2012, Equitable began providing guaranteed income to defined contribution plan participants through AllianceBernstein’s Lifetime Income Strategy. In 2020, we did the same with BlackRock through their LifePath Paycheck strategy. Most recently, J.P. Morgan Asset Management announced its SmartRetirement Lifetime Income target date fund, on which we expect to be one of the insurers.”

Related: In-plan annuities: Are they the next big thing in retirement plans?

The current financial environment reinforces the need for strategies that offer some level of protection for their investments, in addition to a steady stream of income. This has resulted in a recent boom in demand by U.S. consumers for financial solutions like annuities, which can provide for guaranteed retirement income.

“One of the types of products that has gained adoption since the passage of the SECURE Act in 2020 and SECURE 2.0 in 2022 is guaranteed income options in retirement plans,” said Namiot. “This increase in product development and adoption builds on the options that previously were commonly available in the small-to-micro 401(k) plan market and brings them to the large employer market.”