The gap between expectations for retirement and reality “remains stark,” according to the recent Retirement Readiness Survey from insurance and asset management company Aegon.
“Improvements in how workers are financially preparing for retirement are slow,” said Aegon in the annual survey. “The research continues to point to the importance of having a written retirement plan, saving early, and saving habitually.”
However, the survey found that only 14% of workers follow this advice and have a written strategy for retirement. And only one in three workers has a backup plan in the event they become unable to continue working before reaching their planned retirement age.
The survey’s findings are based on 14,400 workers and 1,600 retired people in Australia, Brazil, Canada, China, France, Germany, Hungary, India, Japan, the Netherlands, Poland, Spain, Turkey, the UK, and the US.
According to the survey, respondents expect 46% of their retirement income to come from the government, 24% to come from their employer, and 30% to come from their own savings and investments. “As funding retirement shifts toward the individual,” said the report, “it becomes increasingly necessary for people to take greater personal responsibility for their long-term financial security.”
The survey also found that 57% of workers expect to continue some form of work during retirement, which includes working part-time before stopping altogether (31%), changing the way they work, but continuing to work throughout retirement (16%), and those who say it won’t make a difference to the way they work (10%).
On a global scale, the average worker has a low level of readiness for retirement, said Aegon. According to the Aegon Retirement Readiness Index (ARRI), which measures retirement readiness on a scale of 0 to 10, the global ARRI score was 5.92. Scores of 8 or higher are considered to have high retirement readiness. Scores of 6 to 7.9 are considered medium retirement readiness, and scores of less than 6 are considered “low.”
Although the global retirement readiness score was in the “low” zone, it did improve slightly compared to last year, reports Aegon. The company also said that, for the first time in the six years since the survey started, more than half of the countries in the survey (eight out of 15), received a medium score of 6.0 or higher.
Aegon said the improvement in the global ARRI is due to people feeling more prepared for retirement as many economies continue to rebound from the 2008 financial crisis. It also attributed the rise to strong stock market performance in many countries, “which has boosted defined contribution plans that are typically heavily invested in equities.”