As 2023’s undertones of financial stress linger, “retirement anxiety” remains at the forefront. Per the Transamerica Center for Retirement Studies, workers who are making $100,000 or more tend to agree more that they have a comfortable nest egg for retirement, compared to those who are making $50,000 to $99,000, or less. (Worth noting is that $1.27 million was a magic retirement fund number determined in a different 2023 study about financial well-being.)
In the study, income was a key factor in retirement comfortability, but so was 401(k) access. For example, about 60% of workers in that lower salary range ($50,000 or less) have the opportunity to contribute to an employer-manager 401(k) fund or a similar plan — and only 59% of those workers have taken up their employer on their offer.
The rate of access to a 401(k) plan and participation in it ticks up as the household income range increases. Nearly 3 in 4 of those making $50,000 to $99,999 have access to an employer-offered plan, with 76% participating. Likewise, almost 85% of workers making $100,000 to $199,999 have access to an employer-offered retirement plan, with a similar rate of participation.
Beyond income range and job role seniority status, all kinds of aspects of one’s cultural background affect their retirement fund well-being, according to Transamerica’s researchers.
Salary alone isn’t the sole determinant of 401(k) health
The wage gap rears its head in the retirement conversation: The median household income for women survey-takers was $59,000, compared to the $82,000 reported by men survey-takers. Women who aren’t retired yet have an estimated median of a little more than $20,000 saved, while men in the same position have a little more than $70,000 saved.
“Women are at greater risk than men of not achieving a secure retirement,” Transamerica Institute CEO and President Catherine Collinson said in a statement. “For women, the persistency of the gender pay gap, limited access to employer benefits, and time out of the workforce for parenting and caregiving often translates to lower retirement savings and fewer government benefits.”
Race, ethnicity and community type are also factors
Along with gender, race and ethnicity also appear to be intersecting variables in retirement fund health — although Transamerica notes that findings “raise questions for further research.”
Asian American and Pacific Islander respondents were found to have the highest median household income, followed by White, Hispanic and then Black respondents.
White and Black survey-takers were most reliant on Social Security as a primary source of retirement income — almost equally so (34% and 37%, respectively) and more so than their Hispanic and AAPI peers.
Across the racial breakdown, about 7 in 10 survey-takers expressed concerns that “Social Security will not be there for them when they retire.”
Additionally, rural workers tend to have lower household incomes compared to those of their suburban and urban peers, researchers found. Only 17% of rural survey-takers told Transamerica that they are “very confident” they will be able to retire comfortably; compare that to the 20% of suburban and 27% of urban workers who could say the same.
Where does HR come in?
While workers in the Transamerica study had varying degrees of funds saved, some research from the National Institute on Retirement Security in 2018 indicated that the majority of workers (6 in 10) do not have retirement savings at all. Identity, education, access to 401(k) offers and time to accrue funds are all chance variables in an individual’s retirement fund, as well as their sense of financial well-being. But the one factor that HR can control is benefits education.
Workers continue to voice their desire for more top-down involvement in understanding their benefits, particularly regarding retirement. Almost 90% of survey-takers in a recent report from Vestwell said as much; Workers explicitly named “financial literacy” and information on savings investments as areas of interest.
In a similar vein to Transamerica’s findings on income, the Vestwell respondents who hadn’t contributed to their retirement fund in the six months leading up to the survey said higher salaries (and a higher employee match) would incentivize them to contribute to their savings fund. As market volatility, inflation and overall financial strain creep up on workers, one concrete solution for HR is to bring managers into some of the benefits education duties.
Apart from general disinterest in third-party benefits educators, pamphlets, break room posters or email, workers want to hear from their managers, studies show. One-on-one conversations continue to prove valuable; a benefits expert previously told HR Dive that even communication through messaging platforms such as Slack can be helpful, with “short and sweet” nuggets of information being well-received.
