In a new survey from Principal Financial Group®, middle-income
households are generally applying strong retirement savings habits
and behaviors, even as they balance competing financial
priorities.
According to the survey, Principal® Real Life Retirement
Journeys, 77% of middle-income households (those with between
$50,000 and $99,999) are saving for retirement at an average rate
of 7.8% of their income before receiving additional contributions
from their employers. Additionally, 40% of the middle-income
household respondents anticipate their retirement will be better
than the one they first envisioned.
“Americans should be encouraged to know the priority they have
placed on saving for retirement is meaningful and beneficial to
their futures,” said Teresa Hassara, senior vice president of
workplace savings and retirement solutions at Principal. “Many are
within range of a recommended minimum savings rate of 15%1 when you
include the typical employer match of 4-6%, which helps put them on
the right path for a secure retirement.”
In total, 93% of individuals surveyed said saving for retirement
is important, even when it’s financially difficult. More than half
said their retirement aspirations were first influenced by family
members (65%) and/or friends or peers (52%). However, while family
and friends were reported to be the most influential in inspiring
them to start saving, the survey found employers, financial
professionals, and retirement plan service providers to be
increasingly more helpful sources of information when they began
saving.
Most Influential vs. Most Helpful to
Start Saving for Retirement
Most Influential
Most Helpful
Family & Friends
29%
26%
Employer
9%
20%
Financial Professional
9%
16%
Retirement Plan Service
Provider
7%
17%
Principal reviewed the survey findings in tandem with personal
finance expert Jean Chatzky2, CEO and founder of HerMoney, who
shared, “As vital as our family and friends are to helping shape
our values, beliefs, and opinions, there are often limitations on
both what they know and what they can do to support our financial
goals. Individuals who use resources offered through their
employer’s plan – in some cases at no additional cost – or who get
help from a financial professional typically express higher levels
of confidence in their ability to make decisions and reach their
goals. It’s important for people to understand their access to help
does not depend on their age or how much money they have.”
While the survey results illustrate positive momentum for
retirement savings, it also found nearly one-third (30%) of
middle-income households have made a withdrawal from their
retirement accounts to adjust for changes in their personal
financial situations. Of those middle-income households that
reported taking a withdrawal, the four most common reasons were
to:
- Address large purchases that were not optional such as urgent
home or car repairs (38%)
- Cover lost income due to the loss of their job or their
spouse’s/partner’s job (30%)
- Repay medical debt (18%)
- Pay for expenses related to an adult child or parent (18%)
When asked how taking a withdrawal impacted their financial
progress, 85% of middle-income households reported they didn’t want
to withdraw retirement funds early but had no choice and 57%
reported being able to get back to the amount they were saving
before withdrawing funds early.
More information about the Principal® Real Life Retirement
Journeys Survey is available at principal.com.
1 Based on analysis conducted by the Principal Financial Group®,
October 2024. The estimate assumes a 40-year span of accumulating
savings and the following facts: retirement at age 65; 15%
individual rate including employer contributions; Social Security
providing 40% replacement of income: 4.5% withdrawal of retirement
savings; 6% annual market returns; 2% annual inflation; and 3%
annual wage growth over 40 years in the workforce. This estimate is
based on a goal of replacing about 80% of salary. The assumed rate
of return for the analysis is hypothetical and does not guarantee
any future returns nor represent the return of any particular
investment. Contributions do not take into account the impact of
taxes on pre-tax distributions. Individual results will vary.
Participants should regularly review their savings progress and
post-retirement needs as savings depends on many factors, including
lifestyle, Social Security replacement, and retirement age.
2 Jean Chatzky is a compensated financial commentator, is not
affiliated with any company of the Principal Financial Group. The
views she expresses are not necessarily those of the Principal
Financial Group or any member company.
About the Principal® Real Life Retirement Journeys
Survey
The Principal® Real Life Retirement Journeys Survey had
responses from 1,000 employees between the ages of 18 and 64, with
pre-tax household incomes of $50,000 or more, who are currently
working or who have previously worked for an employer who
offers(ed) retirement savings benefits. The survey was conducted
online between August 23, 2024, and September 1, 2024.
About Principal Financial Group®
Principal Financial Group® (Nasdaq: PFG) is a global financial
company with nearly 19,000 employees3 passionate about improving
the wealth and well-being of people and businesses. In business for
145 years, we’re helping approximately 68 million customers3 plan,
protect, invest, and retire, while working to support the
communities where we do business, and build a diverse, inclusive
workforce. Principal® is proud to be recognized as one of
the 2024 World’s Most Ethical Companies® by Ethisphere4, a member
of the Bloomberg Gender Equality Index, and a “Best Place to Work
in Money Management5.” Learn more about Principal and our
commitment to building a better future at principal.com.
3 As of September 30, 2024 4 Ethisphere, 2024 5 Pensions &
Investments, 2023
Insurance products issued by Principal National Life Insurance
Co (except in NY) and Principal Life Insurance Company®. Plan
administrative services offered by Principal Life. Principal Funds,
Inc. is distributed by Principal Funds Distributor, Inc. Securities
offered through Principal Securities, Inc., member SIPC and/or
independent broker/-dealers. Principal Global Investors leads
global asset management. Referenced companies are members of the
Principal Financial Group®, Des Moines, Iowa 50392.
© 2024 Principal Financial Services, Inc. Principal®, Principal
Financial Group®, and Principal and the logomark design are
registered trademarks of Principal Financial Services, Inc., a
Principal Financial Group company, in the United States and are
trademarks and services marks of Principal Financial Services,
Inc., in various countries around the world.
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version on businesswire.com: https://www.businesswire.com/news/home/20241111075670/en/
Phillip Nicolino, 515-362-0239,
nicolino.phillip@principal.com
Principal Financial (NASDAQ:PFG)
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