The question on this prime time show isn’t “Who wants to be a millionaire?” It’s “Who needs to be a millionaire?”
Workers in a 2015 survey say they will need to have saved $1 million by the time they retire in order to feel financially secure. This figure is a big increase from the $600,000 they said they needed to feel financially secure when asked the same question back in 2011.
As more workers turn 65 and think about life after the office, people begin thinking about what to do in retirement and how to fund hobbies, travel and cross-country visits to family and friends, according to Catherine Collinson, president of the Transamerica Center for Retirement Studies and the Transamerica Institute.
Retired workers who want to eat out and play golf every day on Hilton Head Island may need even more than $1 million to pay for South Carolina luxuries. Retired workers happy to watch the surf break at sunset from a Costa Rican rental may do fine with a retirement kitty of $300,000.
Either way, the more information leaks out about how much — or how little — workers have to pay for their golden years, the better it is for financial advisors.
“As the population ages and boomers turn 65, the overall population has longer life expectancies. Retirement planning for old age is become a bigger topic of conversation and people are talking about it more, so it’s sinking in,” said Collinson said in an interview with InsuranceNewsNet.
The data, compiled by Harris Poll for Transamerica, was published in the 16th annual Transamerica Retirement Survey of Workers published earlier this year.
The poll surveyed 4,550 workers at for-profit companies employing 10 or more people.
The survey also found that 26 percent of workers estimated that $500,000 would be enough for them to feel financially comfortable.
Another 19 percent estimated they would need between $500,000 and $1 million, 25 percent said their estimated needs would range between $1 million and $2 million, and 30 percent said they needed $2 million or more, the survey found.
Getting there is going to be a very different story as the total median household savings in retirement accounts is $63, 000, the survey also found.
Collinson said the million-dollar mark represents something of a mythical number in popular culture, even if the reality is that for some workers it may not be enough, and for others it may be more than they need.
“It’s a very tangible benchmark, it’s a milestone,” she said.
Still, even with a low household savings rate, it doesn’t hurt for people to think big about the amount of money needed at retirement.
The survey found that 58 percent of workers are saving for retirement outside of work and, not surprisingly, the older a worker, the more likely he or she is to be saving outside of an employer-sponsored plan.
Among workers saving outside of work, 24 percent have a life insurance policy, but the disparity is large and depends on the age range, the survey found.
Only 15 percent of workers in their 20s, 17 percent in their 30s, 22 percent in their 40s, 33 percent in their 50s and 32 percent in their 60s, said they owned a life insurance product outside of work, the survey also found.
Among workers with retirement investments outside of the workplace, 12 percent said they own an annuity.
The survey found that 6 percent of people who own an annuity as a retirement investment vehicle outside of the workplace were in their 20s and another 6 percent who own such annuities were in their 30s. The survey also found that 9 percent were in 40s and 15 percent were in their 50s.
Annuity penetration among workers saving outside of retirement was highest among those in their 60s with 21 percent in their 60s reporting they owned an annuity, the survey found.
The life and annuity ownership penetration data is consistent with life and annuity ownership trends among the broader market. “Annuity holders are typically older and it’s interesting too that it (annuity ownership) goes up with age,” Collinson said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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