There are two key questions that workers need to consider about investing for retirement. First, are you saving for retirement? The second question only applies to those who actually manage to save: Are you saving enough?

A new Natixis Global Asset Management report issued this week shows that long-term retirement goals are losing out to short-term financial pressures. This is a serious situation for millions of Americans. Even those who can save may be falling way short of what their long-term needs will be.

The new report identified that the biggest risk to Americans’ retirement security is failing to save enough money. This seems obvious enough, but 60% of workers are setting aside less than 7.5% of their income for retirement. Some 40% of workers are contributing less than 5% of their income toward retirement. Also, almost four of 10 workers have said that they prematurely accessed their retirement accounts in order to meet other financial goals.

Nataxis did note that millennials are saving for and thinking about retirement as early as right out of college. Still, there is often a conflict between investors’ long-term goals and the pressure of immediate financial needs. Many Americans are making minimal contributions or are opting out of their retirement plan altogether. Another issue is that some workers are borrowing against their retirement accounts.

Natixis’s 2015 Retirement Plan Participant Study was based on a survey of 1,000 employees who actually have access to a workplace defined contribution plan. This is like a 401(k) or an IRA. The estimated average annual income of survey respondents is $100,118.

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A sad point here is that many workers use their long-term savings account for cash flow to cover immediate expenses or to reach financial goals that are a higher priority now. Nataxis showed the following from its survey:

• 37 percent have borrowed from their retirement accounts, including 38 percent who needed emergency funds for a financial hardship and 19 percent who used the funds to buy a home.
• Of those who have changed jobs, 43 percent have taken a lump-sum distribution rather than keeping assets in the company plan or rolling them into another qualified plan.
• One in three (30%) have taken an early withdrawal from their retirement plan.

Additional data from the study was as follows:

On average, survey respondents say they will need $805,000 to fund their retirement and expect to live on that for another 23 years after they stop working. To date, they have accumulated $83,000 in their workplace savings plan and $95,000 overall, including all sources of retirement savings – or 11% of their stated goal.

Baby Boomers (age 51 to 69) have put away only 20 percent of the $946,000 they estimate is needed to fund retirement. Workers in Generation X (age 35 to 50) may be the most financially pressured group. They’ve saved only 10 percent of the $741,000 they estimate they’ll need, and are more likely than any other group to have opted out of their workplace savings plan because of debt.

Younger workers (younger than age 34) may be a bright spot among plan participants. While having only saved about 3 percent of the $769,295 they estimate is needed to retire, Gen Y, or Millennials, began contributing to a workplace savings plan at a younger age (23 years old, on average) than other generations, giving them a head start in accumulating assets. Members of Generation X began saving at age 30 and Baby Boomers began at age 33.

Those workers who opt out of retirement plans have the following reasons:

• 51% say they need money today.
• 50% say that employers don’t provide a match or that their match is too small.
• 34% overall (and 40% of Generation X non-participants) say they have too much personal debt to be able to save.
• 23% say they need to pay off student loans.

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One additional issue was made here. This survey of retirement plan participants found that most are wary of the government interfering with their retirement planning and skeptical that Social Security will even be available to them. Some 85% do not believe that a government-mandated savings requirement would help them be more successful in reaching their retirement savings goals.

It is sad that this many workers making $100,000 on average are not saving enough, or saving at all, for retirement.

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