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Life has been tough on the middle class in recent years. Homes have become ridiculously expensive, and inflation has made simply putting food on the table more challenging.
So, it should come as little surprise that middle-class Americans are not well-prepared for retirement.
Recently, the Transamerica Center for Retirement Studies surveyed more than 5,700 middle-class adults and — among other things — asked them questions about the state of their retirement planning.
In defining survey respondents as “middle class,” Transamerica focused on people with an annual household income between $50,000 and $199,999, which the firm says accounts for 55% of adults in the U.S.
Based on their survey responses, here are clear reasons why retirement is looking risky for middle-class Americans.
1. They may not have enough money for retirement
Many of us discover far too late that our nest egg is not large enough to support a long retirement. In some cases, this realization dawns on us just before retirement. But others understand much earlier that their retirement plans have gotten off-track.
The survey found that just 24% of middle-class respondents “strongly agree” that they are building or have built up enough retirement savings.
The numbers show their worries are well-placed. Among middle-class respondents who have yet to retire, the median total value of their household retirement accounts is $66,000 in 2023 dollars.
Perhaps unsurprisingly, outliving money is the top retirement fear among all survey respondents, with 40% citing that worry.
2. They expect to work past retirement age
Among middle-class respondents who have yet to retire, 49% expect to stop working after age 65 or never, and 52% plan to work after retiring.
While such plans sound reassuring, they are unlikely to come to pass for many.
Among those who already have retired and are in the middle class, the median retirement age is 62. In addition, 50% said they had to stop working sooner than planned.
This is a common finding in retirement studies: Poor health, age discrimination and other factors often push people out of the workforce earlier than they would like.
3. They are counting on Social Security
Many people are counting on Social Security to fund their retirement. This is likely a mistake — and not because the program itself is in some trouble.
The survey found that 72% of middle-class respondents cite Social Security as an expected source of retirement income. That is all well and good.
However, more than one-quarter of respondents — 27% — expect Social Security to be their primary source of retirement income. It’s likely some of these folks expect Social Security to be their only source of income. But as the Social Security Administration points out, Social Security was never intended to serve that purpose.
Although using Social Security as your main or sole source of income is likely not wise, it might be possible anyway. For more, check out “8 Tips to Retire Comfortably on Social Security Alone.”
4. Few have acted to improve their retirement prospects
Worry often is closely tied to inaction. Although many of the survey respondents feel anxiety about their retirement plans, relatively few are doing much about it.
Just 17% frequently discuss retirement planning, saving or investing with family and close friends. Less than one-quarter — 21% — say they have “a lot” of working knowledge about personal finance.
Around one-third — 34% — use a professional financial adviser, and 24% have a written financial plan for retirement.
No matter how far you fall behind, it’s never too late to start catching up when it comes to retirement savings. That’s true even if you don’t have a workplace retirement plan, as we note in “7 Ways To Save for Retirement Without a 401(k).”
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