In a recent survey of nearly 3,300 working Americans to determine current levels of retirement preparedness, Putnam Investments identified three key variables that boost workers’ retirement savings, regardless of their income: consistent, long-term saving, access to financial advice and workplace savings plans. The Putnam Lifetime Income Score research found that American households are on track to replace 74% of their current income in retirement. “While promising in some areas, these findings tell us—clearly—that U.S. households still need to save more to reach sufficient income for successful retirement,” said Putnam President and CEO Robert L. Reynolds. “It is critically important to strengthen public and private retirement systems and broaden access to workplace savings for all working Americans.” Reynolds added: “The data also demonstrates, unmistakably, the valuable role that financial advice plays in helping individuals prepare for retirement, as well as the behavioral changes needed for success. Overall, we hope this body of research will encourage individuals, their advisers, employers and policymakers to take the steps needed to achieve greater retirement security for this nation.” The research also found that when Social Security is not factored into retirement income, American households are on track to replace a mere 30% of their current income. Among those households earning less than $50,000 a year, without Social Security, they will replace a mere 17% of their pre-retirement income. Among those between the ages of 50 and 65, they have Lifetime Income Scores of 60% replacement, but without Social Security, that drops to 28%. Young workers between the ages of 18 and 30 are also in good stead, with a replacement ratio of 73%, but that becomes 33% without Social Security. “The American dream of a dignified and secure retirement is at risk for millions of Americans,” Reynolds said. “The Putnam Lifetime Income Score analysis suggests that if we want to avoid a major increase in elderly poverty over the next generation, we have to act now to make Social Security solvent and to raise personal retirement savings across the board. Enacting auto-IRA payroll deduction to help make workplace savings programs available to all working Americans and maintaining tax incentives to encourage strong participation by individuals in 401(k) plans and IRAs more broadly are significant pieces of solving the retirement puzzle as well.”
Demonstrating the power of professional advice, those with a paid adviser had a Lifetime Income Score of 82%. For those without? Sixty-one percent.