The good news: Employer-sponsored retirement plans and individual retirement accounts have risen since last year.
The bad news: People are still worried about retirement savings, even when they save, and millennials in particular are anxious about their finances (which does not bode well for stashing away money for the future).
A new Fidelity Investments analysis of its quarterly data released Thursday, along with other recent studies, suggest that despite some improvements, Americans are still in the thick of a retirement crisis and worrying themselves sick about it. Fidelity found balances for employer-sponsored retirement plans, such as 401(k) and 403(b) plans, have jumped 6% year-over-year, to an average of $104,000, while individual retirement account balances have increased almost 7% since last year, to an average of $106,900. At the same time, the percentage of employees taking out loans from their 401(k) plans dropped to its lowest point since 2009. ‚ÄúMore and more people in today‚Äôs environment are going to have to fund their retirement paycheck,‚ÄĚ said Katie Taylor, vice president of thought leadership at Fidelity. As a result, workers are taking their retirement savings more seriously.
Balances are looking up for some. The number of so-called 401(k) millionaires jumped in the second quarter by 49,000 to 168,000, Fidelity said. The company manages about $7 trillion in client assets.
Even with these gains, people are still nervous about their finances ‚ÄĒ even when they do save or pay the bills on time. A recent survey by Allianz Life Insurance of North America found about half of people between 45 and 65 years old who have significant retirement savings (about $400,000) still feel behind, much more than the 4% of those who do not feel behind. A majority of them (85%) worry about having a comfortable retirement.
Millennials aren‚Äôt far behind this group ‚ÄĒ 43% of older millennials say money leaves them with ‚Äúrestless nights,‚ÄĚ more so than any other age bracket, according to Bankrate.com. They‚Äôre worrying about credit card debt, paying their mortgage or rent and bills and other financial obligations. For many millennials, retirement savings is an afterthought. ‚ÄúThey have a lot on their plate,‚ÄĚ said Amanda Dixon, an analyst at Bankrate.com. ‚ÄúEven though the economy is doing well, a lot of people are having a hard time making ends meet.‚ÄĚ
All generations seem to be worrying about the expenses within retirement: young baby boomers, who are 54 to 63 years old, and Generation X members, who are between 38 and 53, are most likely to be stressed about retirement savings. Younger baby boomers are also worried about medical expenses (which could cost a couple $275,000 throughout retirement). Saving for retirement kept the most Americans up at night, Bankrate.com‚Äôs survey found.
So what helps these savers? Automatic enrollment, where companies sign up their workers for retirement plans when they‚Äôre hired, instead of waiting for the employee to get around to it, Fidelity said. This technique has already proven successful for millions of Americans. According to Richard Thaler, winner of the Nobel Prize in economics, automatic enrollment could have amassed almost $30 billion in retirement savings for employees. As a result of signing up workers for these accounts, between 15 and 16 million people have boosted their savings rate ‚ÄĒ four times as many as in 2011, according to Thaler and Shlomo Benartzi‚Äôs research. About two-thirds of the workers Fidelity analyzed in its study have increased their savings rate within the last 10 years after being automatically enrolled in their 401(k) plans. ‚ÄúWe are seeing a lot of positive impacts on plan design features that employers have adopted, things like automatic enrollment and automatic increases,‚ÄĚ Taylor said. ‚ÄúThey‚Äôre taking more proactive steps to increase the default deferral rates to encourage people who may be suffering from inertia.‚ÄĚ
While those accounts are growing, Americans can take on other tasks, such as reviewing financial responsibilities as well as financial goals. The goal shouldn‚Äôt be to deprive yourself of things you love or want ‚ÄĒ such as coffee or a vacation ‚ÄĒ but don‚Äôt go overboard, either, Dixon said. ‚ÄúLook at how much money is coming in and going out and use that to make decisions for what you want to do,‚ÄĚ she said.