80 Is The New 65 For Many Middle Class Americans When It Comes To Retirement, Wells Fargo Retirement Survey Finds

“Retirement Age” a fading concept as people plan to work until reaching savings goal

Middle class Americans below age 50 more open to Social Security and Medicare cuts to help balance budget, while 50-somethings say “Hands off!”

CHARLOTTE, N.C.--()--The concept of a “retirement age” is going the way of the typewriter, another 20th-century relic that has been made irrelevant by changing circumstances. Middle class Americans now expect to work until they have saved enough to afford to retire, according to results from the seventh annual Retirement Survey from Wells Fargo & Company (NYSE:WFC). Three fourths (76%) of the 1,500 middle class Americans surveyed by telephone by Harris Interactive in August and September 2011 say it is more important to have a specific amount saved before retirement, regardless of age, while only 20% say it is more important to retire at a specific age, regardless of savings.

The survey also found:

  • A quarter (25%) of middle class Americans say they will “need to work until at least age 80” to live comfortably in retirement.
  • Three-fourths (74%) of middle class Americans expect to work in their retirement years, including 39% of all respondents who will need to work to make ends meet or maintain their lifestyles, while 35% say they will work because they want to, rather than out of financial need.
  • Among middle class Americans age 40 to 59, 54% say they will “need to work,” compared to 34% of those age 25 to 39. Accordingly, only 25% of those between the ages of 40 and 59 say they will work in retirement because they “want to,” versus 45% of Americans between the ages of 25 and 39.
  • Of the Americans who will work in retirement, 47% say they will do “similar work” to their pre-retired years, while 42% say they will work in a position that requires “less responsibility.”

“The fact that the vast majority of middle class Americans expect to work well past the traditional retirement age has significant societal and economic implications,” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. “Will people be physically and mentally able to work later in life? What will it mean for young people entering the workforce? And, how does our system of retirement savings need to be reformed to help reduce the savings gap?”

Since at least the early part of the 20th century, Americans expected to work until hitting a retirement age — often 65 — and then to retire with an employer-paid pension plan. However, defined-benefit pensions are now uncommon in the private sector and are being scaled back for a growing number of new government employers. At the same time, political leaders are discussing cuts to future Social Security and Medicare benefits, and many Americans have seen their savings washed away by unemployment, sharp declines in house values and wild swings in stock prices.

Social Security – America’s Expectations

As political leaders consider potential cuts to future Social Security and Medicare benefits to help close the budget gap, 49% of middle class Americans between the ages of 25 and 49 are willing to accept future cuts to help reduce America’s debt burden. Only 28% of those age 50 to 59 and 19% of those age 60 to 75 would be willing to accept cuts.

“We’ve seen a shift in the role of work and employment during the traditional retirement years but we’re also seeing a shift in expectations for social support. There is a willingness among younger Americans to put traditional support systems on the table for reform as we look for solutions to strengthen the country and address the debt load of our nation,” said Laurie Nordquist, director of Wells Fargo Institutional Retirement and Trust.

On the question of willingness to consider Social Security and Medicare cuts, the divide between those under 50 and those over 50 may be linked to the fact that younger people aren’t counting much on Social Security anyway. More than a quarter of people in their 20s (26%) and 30s (28%) expect no income at all from Social Security during retirement years, and on average, people of those ages expect Social Security to cover only 20% of their retirement funding.

By contrast, those in their 50s expect Social Security to provide 36% of their retirement funding, while those in their 60s expect it to cover 46%. Democrats expect a higher percentage of their monthly retirement income to come from Social Security (30%), compared to 25% for independents and 24% for Republicans. But, in willingness to consider benefit cuts, responses from Democrats and Republicans were within the sampling error: 48% of Republicans and 44% of Democrats were willing, compared to only 41% of independents.

This willingness increased with household income: while only 39% of those earning between $25,000 and $49,999 were willing to take a reduction, a majority (55%) of those earning more than $100,000 were willing to do so.

Retirement Savings Not Adequate and Hard to Achieve; Nobody Wants a Mortgage in Retirement; Unrealistic Forecast for Health Care Expenses

A majority of middle class Americans (53%) say they “need to significantly cut back on spending today to save for retirement.” Americans have saved, on average, only 7% of their desired retirement nest egg– a median of $25,000 in retirement savings vs. a median retirement goal of $350,000. Three in ten people (29%) in their 60s have saved less than $25,000 for retirement, possibly indicating they will rely heavily on Social Security.

“For several years now, we’ve seen that Americans are undersaving for retirement and a majority do not trust the stock market as a place to invest for retirement. However, we did find a bright spot among middle class Americans – more than three quarters do not want to retire with mortgage debt. This is an important goal, particularly for younger Americans,” added Nordquist.

  • After experiencing the home mortgage crisis of the past several years, people have taken to heart the idea of retiring without mortgage debt: 86% of respondents ages 25 to 75 say it is important to own their home debt free by retirement. And 63% of respondents said they wouldn’t consider being renters in retirement. Older generations seem less concerned about retiring without mortgage debt. While 87% of those age 25 to 29 say it is “very important” to pay off mortgage debt, only 40% of those ages 60 to 75 agreed.
  • Confidence in the stock market remains low, with 68% saying they aren’t confident the stock market is a good place to invest for retirement. When Americans were asked what they would do to invest $5,000 for retirement – invest in a CD or the stock market – 50% of respondents said “invest in mutual fund or stocks” and 45% said they would purchase a bank CD. The percentages flipped when people age 25-29 were asked the question.
  • A plurality of those surveyed (37%) say being able to pay monthly bills is their most important day-to-day financial concern, ahead of healthcare (14%), education (12%) and saving for retirement (11%).
  • Even those between the ages of 60 to 75 say paying monthly bills (39%) is a bigger concern than healthcare costs (32%).
  • In fact, middle class Americans are significantly underestimating the amount of out-of-pocket healthcare costs they will face in retirement. Respondents estimated a median of $60,000 in costs, while only 20% estimated $100,000 or more. A 2010 study from the Center for Retirement Research at Boston College estimated that the present value of lifetime uninsured health care costs for a typical married couple age 65 will be $197,000.

The 401(k) – A Valued Savings Vehicle That Could be Improved

  • Middle class Americans are taking good advantage of their 401(k)s: 75% say they have access to a 401(k) through their employer, and the median contribution rate to the plan is 6%.
  • The vast majority said that employer matches encourage them to save more, a sentiment that was especially strong among younger people (86% for those age 25 to 29 and 91% of those 30 to 39 versus 78% for people in their 40’s).
  • 79% of respondents agree employers should provide personal advice to help employees manage their 401(k) plan.
  • Younger people want personal advice to manage their 401(k) plan – at a rate of 86% for ages 25 to 29 and 81% for ages 30 to 39.
  • 78% say employees should be given the option to get a fixed monthly payment from their retirement accounts.
  • 62% said employers should automatically enroll employees in a 401(k) or similar plan.
  • 61% said 401(k) plans should automatically increase the employee contribution rate by 1% each year.
  • 13% say they have taken money out of their 401(k) to “pay for personal financial emergency or other need.”

“Overwhelmed,” “Too far behind,” and Planning to Withdraw Their Savings Too Quickly

Of the 69% of middle class Americans who lack a written financial plan, the majority (60%) either say they are “overwhelmed,” say it is “pointless” or say they are “too far behind to catch up.” Only 24% say it is because they are confident in their ability to retire comfortably.

Asked to name their biggest fear about retirement, 37% say they have “no fears,” because “it will work itself out,” 42% say their fear is that “I can do all the right things today and it still won’t be enough for tomorrow,” and 19% say they fear “I will have under-saved and it will be too late to recover.”

When asked how much they will withdraw each year from their retirement savings in Retirement, 22% say 5% or less annually but 56% of the respondents indicate they would withdraw 6% or more on an annual basis.

Diminished Outlook for Inheritance

Economists have longed talked about the massive amount of wealth that will transfer between generations as the Baby Boomers age. But among the middle class, shifting economic realities mean those transfers will often disappoint. Four-in-ten (43%) middle class Americans expect to leave no inheritance to their children due to money needed to support their own retirement. Even among households surveyed with more than $100,000 in household incomes, three in ten people (29%) expect to leave no savings behind.

If they had enough money to spend in retirement, nearly three-fourths (72%) of middle class Americans say it is more important to have money to enjoy experiences now with their children or grandchildren, vs. 22% who would rather save the money to pass on later to their heirs.

Enjoying life now and not worrying about retirement is inversely related to household income – those with higher household incomes are more worried about retirement. While 57% of those earning less than $25,000 annually agree that “I plan to enjoy life now and I’m not worried about retirement/tomorrow,” only 26% of those earning $100,000 or more share that sentiment.

Members of the media can obtain a full study by contacting Amy Hyland Jones at (704) 383-4995.

For help understanding how to prepare for and live in retirement, visit Wells Fargo’s retirement site at https://www.wellsfargo.com/investing/retirement/.

About the Survey

On behalf of Wells Fargo, Harris Interactive Inc. conducted 1,500 telephone interviews of middle class Americans in their 20s, 30s, 40s, 50s, 60s and 70s, surveying attitudes and behaviors around planning, saving and investing for retirement. The survey was conducted August 9 – September 23, 2011. To target the middle class, the survey included only respondents who fell within specified income and wealth brackets. Those age 25 to 29 had 2010 household income of $25,000 to $99,999 and household investable assets of $99,999 or less. Those age 30 to 75 had 2010 household income of $50,000 to $99,999 or household investable assets of $25,000 to $99,999. The lower limits for 20-somethings were used to reflect the early stage of their careers. For the 20s age group, only respondents age 25 to 29 were included in order to focus on workers.

Data were weighted as needed to represent the population of those meeting the qualification criteria. Figures for education, age, gender, race/ethnicity, region, household income, investable assets, number of adults in the household, and number of phone lines (to adjust for probability of selection) were weighted where necessary to bring them in line with their actual proportions in the population.

About Wells Fargo

Wells Fargo & Company (NYSE:WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With more than 270,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

About Harris Interactive

Harris Interactive is one of the world's leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American and European offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us - and our clients - stay ahead of what's next. For more information, please visit www.harrisinteractive.com.


Wells Fargo & Company
Amy Hyland Jones, 704-383-4995 (Media)
Allison Leong, 212-350-3824 (Media)


Wells Fargo & Company
Amy Hyland Jones, 704-383-4995 (Media)
Allison Leong, 212-350-3824 (Media)