Nationwide releases America’s Retirement Voice

Columbus, OH - The Nationwide Retirement Institute® announces America’s Retirement Voice, a new research report that examines issues affecting retirement security, based on insights from the retirement saving behaviors of the nearly 2.5 million defined contribution (DC) plan participants Nationwide serves.¹ The first edition reveals the average age workers begin saving for retirement is 31.²

“While age 31 seems relatively young to think about retirement, it means most employees are missing out on nearly a decade of savings, asset accumulation and the associated potential for compound returns,” said John Carter, president of retirement plans for Nationwide.

Retirement Savings Obstacles 

Nationwide commissioned a survey conducted online by The Harris Poll among more than 1,100 employed Americans which revealed 76 percent state something has prevented them from to contributing as much as they wanted to their retirement plan.

According to the survey, three main factors prevented employed Americans from saving the amount they wanted to a retirement plan: not making enough money (44 percent), daily expenses (41 percent) and paying off debt (38 percent).

Yet, when asked at what age a person should start saving for retirement, 35 percent of employed Americans say it is between age 25 and 30, while 42 percent noted between age 18 and 24.

“America’s workers understand the importance of saving for retirement and those that have access to workplace retirement plans value them. However, many could benefit from guidance on how to prioritize retirement savings while managing their day-to-day financial needs and financial goals like paying off debt,” noted Carter. “We’ve seen more engagement and positive behaviors from younger workers over the years, but many still wait when it comes to retirement until their other financial goals are met.”

Balancing Retirement Savings and Other Financial Goals

In starting a new career, many are focused on getting rid of their student loan debt as soon as possible often by paying more than the minimum payment. However, it’s important to consider if long-term financial goals are better served by paying off debt over a longer period of time.

For example, consider someone who is paying $500 a month on a 10-year, $35,000 student loan that charges 6 percent annualized interest. The terms of the loan require a minimum payment of $390. By repaying more than the minimum, he or she will save $10,594 in interest and cut the payoff period by 1.80 years.

Or, he or she could contribute that additional $55 per pay ($110 per month) to a retirement account by reducing the loan payment to the monthly minimum. In doing so, he or she can potentially accumulate $16,267 for retirement over the 10-year period, assuming a 6 percent investment return and no employer match, instead of saving $10,594 in interest on the student loan repayment. Please keep in mind that investing involves market risk, including possible loss of principal.

Buying a home is a major financial goal and accomplishment, but home prices have steadily risen making it more difficult to balance saving for a down payment with saving for retirement. However, by looking at the math, it may be possible to accomplish both.

For example, if someone is saving $300 a month for a down payment, earning 1 percent interest, that person will have $20,000 saved for a down payment in a little more than four years. However, that same person could save $200 for a down payment and redirect the other $100 into a retirement account. While that action would delay the down payment goal by a little more than a year, it could also generate $8,608 in retirement savings based on a 6 percent return and no employer match.

“While it’s difficult to juggle multiple financial priorities, taking a long look at everything together and working with a financial advisor to develop a written financial plan makes it easier to effectively reach all of one’s goals,” added Carter.

America’s Retirement Voice: “Smart Financial Moves In Your 20s and 30s” provides additional data and insights as well as tips on saving for retirement. It can be viewed here.

Survey Methodology 

This survey was conducted online within the United States by The Harris Poll on behalf of Nationwide from November 6-8, 2018, among 2,012 U.S. adults ages 18 and older, among whom 1,161 are currently employed. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Tracie Patten at pattet5@nationwide.com.