T. Rowe Price engaged NMG Consulting to conduct a national study of 3,005 adults aged 21 and older who have never retired and are currently contributing to a 401(k) plan or are eligible to contribute and have a balance of at least $1,000. The online survey was conducted from July 24 to August 14, 2018. This is the fourth in a series of participant surveys, and data from prior surveys is used in this report for comparison purposes.
The third published segment of our research focuses on retirement satisfaction.
- Retirees who took advantage of their 401(k)s while they were working are highly satisfied and financially stable in retirement.
- Existing 401(k) plans can ensure retiree satisfaction via plan design that increases participation and savings rates.
- Employee education programs should use retiree satisfaction data to help workers understand the reasons to save.
Retirees’ Experience Exceeds Expectations
What is a successful retirement? Our research shows that retired workers are faring better than current workers expect to fare (Figure 1), and better than what they had expected themselves.
(Fig. 1) Retirement Expectations of Current Workers vs. Retirees
|I will work at least part time in retirement||52%||16%|
|I will have enough money to pay for health care||46%||77%|
|I will have to reduce my standard of living||41%||20%|
|I will live as well or better as I did when I was working||39%||69%|
|I will be able to leave money to family members or charities||32%||59%|
|I will run out of money||25%||9%|
|I will be able to help out younger family members with tuition or housing expenses||25%||27%|
Drivers of Retiree Satisfaction
Of the total population of retirees we surveyed, 85% indicated that their retirement turned out to be as good or better than expected, with 80% saying that their retirement years are more enjoyable than their working years. By contrast, 14% indicated that retirement was worse than expected. We can gain valuable insights into potential drivers of satisfaction by examining the differences between satisfied and unsatisfied retirees.
Financial matters—income, assets, and both current and anticipated expenses— are the primary drivers of retiree satisfaction. Satisfied retirees have more assets, greater incomes, less debt, and fewer concerns about future expenses. Clearly, public policy, plan design, and participant education that encourage early, adequate, and steady savings will go far to mitigate the shortfalls that contribute to retiree dissatisfaction.
(Fig. 2) Financial Data
|Satisfied Retirees1||Unsatisfied Retirees2|
|Median household income||$90,000||$65,000|
|Average household debt3||$15,000||$24,000|
|Money held in retirement accounts4||$370,000||$281,000|
of satisfied retirees report that they live as well or better in retirement as they did while working.
Also critical for individuals is their ability to maintain a standard of living in retirement that is similar to their working years.
This affirms our belief that finances play an important role in retiree satisfaction:
- 15% of satisfied retirees expect to have to reduce their standard of living, compared with 48% of unsatisfied retirees.
- 5% of satisfied retirees expect to run out of money, compared with 28% of unsatisfied retirees.
Retiring When I Want, and Working Only for Enjoyment
Our research shows that retiring in an orderly fashion, when the individual is ready and has saved enough, is much more likely to produce post-retirement satisfaction than when the individual must retire unexpectedly:
- 62% of satisfied retirees reported retiring when they were ready or at the point they had planned to, compared with 51% of unsatisfied retirees.
- 52% of satisfied retirees report that they had attained their desired level of assets, age, and savings, compared with only 31% of unsatisfied retirees.
- While only 15% of respondents report working or looking for work, the reasons for working are telling. For unsatisfied retirees, 70% of those still working report that they are doing so because they need the money compared with only 42% of satisfied retirees. Conversely, 32% of unsatisfied retirees report liking the mental stimulation provided by their current work, whereas 52% of satisfied retirees do.
Your 401(k) Will Work—If You Use It
Our research finds that a 401(k) plan can make the difference between a satisfied retirement and an unsatisfied one. Employees with sufficient retirement savings can retire when they want, work in retirement only if they choose to, and generally enjoy a more satisfactory retirement. The key to success is saving enough—starting early, saving at high enough rates, and staying on track.
1 Agreed "somewhat" or "completely" that "so far, my retirement has turned out to be just as good or better than expected."
2 Agreed "somewhat" or "completely" that "so far my retirement has turned out to be worse than expected."
3 All types of debt, self or other adult. 51% of satisfied retirees report no debt, versus 43% of unsatisfied retirees.
4 Market value of accounts of self and other adult, including traditional or Roth IRAs, 401(k), Roth 401(k), 403(b), 457, profit sharing, or other DC accounts at current or former employers.