Annual Retirement Study Reveal - Wells Fargo 2020 Steering savers toward a better retirement - Wells Fargo Asset ...
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Wells Fargo 2020 Annual Retirement Study Reveal Steering savers toward a better retirement INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
2020 has exposed the
reality that the road
to retirement doesn’t
always follow a straight
path. No one knows what
the future holds, but we
can better prepare for
life’s uncertainties.
2 | Wells Fargo 2020 Annual Retirement Study Reveal
This year’s retirement study sheds light on how an unexpected crisis can impact retirement—in real time.
Today’s workers and retirees are optimistic about their financial future, but some are more vulnerable than
others. Those with a planning mindset are much better prepared, including workers whose employment
has been impacted by the pandemic. Findings like these can help create better awareness of the attitudes
and behaviors that make a difference. Better awareness can lead to better decisions and better outcomes.
With the right perspective and resources, employers and advisors can help people re-envision saving for
retirement as a positive experience, anticipating and preparing for the journey—like planning a trip.
What is it about retirement that workers look forward to
and retirees enjoy?
Wells Fargo conducts this annual survey to uncover insights that help us develop solutions to improve
retirement outcomes. Beneath this data lies the everyday experiences of what retirement means to
thousands of workers and retirees around the country.
“Feeling relief from the pressure of having “I wish I could answer this. I have “Traveling with my wife and
to work to ensure there will be sustainable nowhere near enough money to spending time with our
income to support myself in those days.” ever be able to retire.” grandchildren.”
“I enjoy feeling like a free spirit and feel “Counting our blessings that we “Turning my hobbies into
frustrated that I don’t have the health have a roof over our head, are my retirement profession.”
and strength of my youth to do the things debt free, and can afford to buy
I now have time to do.” food and other necessities.”
Wells Fargo 2020 Annual Retirement Study Reveal | 3
Updating the retirement itinerary
With the steady shift of assets from defined benefit to defined contribution
plans, increasing lifespans, and added health care costs, the importance of
planning and saving for retirement is greater than ever.
It’s difficult to know how much The real impact of COVID-19 on
is needed for retirement and retirement is just beginning to emerge.
how to get there.
Workers who don’t know if they can save enough Will need to work or work
Workers who can’t estimate how money to retire because of the impact of the more in retirement:
much money they will need: COVID-19 pandemic:
39% of Millennials
38% of Generation X
9%
workers
women men
49% 33% 31% of Boomers
18%
Retirees who aren’t sure or can’t
estimate how much they have
already saved:
workers impacted
by COVID-19*
48%
*COVID-19Impactedarepeoplewhohavebeenlaidofforfurloughed,havehadreducedincome,etc.,duetothepandemic.
4 | Wells Fargo 2020 Annual Retirement Study Reveal
A lesson in planning for the unplanned
Despite the challenges, most workers still feel in But the economic downturn has shaken the financial
control and are optimistic about the future. security of many workers whose employment has
been impacted by COVID-19.
Satisfied with their
current life: 8 in 10 Have turned to family and friends to help cover
expenses due to the economic downturn:
17%
Have used retirement savings to pay expenses:
17%
Can positively affect their financial situation based on
Have used emergency savings to pay expenses:
the decisions they make:
24%
92
workers
%
Have an unmanageable amount of debt:
35%
Wells Fargo 2020 Annual Retirement Study Reveal | 5
The power of a planning mindset
What is it about those who feel most financially secure that can help others improve retirement
outcomes, including those who are most vulnerable financially?
COVID-19 is like a financial lab that demonstrates the benefit of having a planning mindset—the
combination of near-term and longer-term planning that strengthen a person’s financial future.
Workers with a planning mindset whose employment has been impacted by COVID-19 are better
prepared than those without a planning mindset:
3x more likely to feel
satisfied financially 6x more likely to feel they are
saving enough for retirement
4x more likely to feel in
control financially 4x more likely to prefer saving for retirement,
to ensure a better retirement
Four parts of the planning mindset
1 In the last six months, 2 It makes me feel 3 I am able to work 4 I prefer saving for
I have set and achieved better to have my diligently toward retirement now, to
a goal or set of goals to finances planned out a long-term goal. ensure I have a better
support my financial life. in the next 1–2 years. life in retirement.
6 | Wells Fargo 2020 Annual Retirement Study RevealNear-term tactics, long-term goals
People with a planning mindset tend to have a more positive retirement
outlook. The planning mindset bridges near-term and long-term
challenges of saving today for a goal that’s decades away. It helps to keep
savers on target and it may even help retirees find the best retirement
income solution. Some people naturally have it, and others can develop it
or get guidance through their retirement plan or financial advisor.
Employers and advisors can increase awareness and integrate automation
that fosters a planning mindset—a behavioral approach activates the
individual to learn by doing. That’s especially important for retirees who
face a series of complex decisions with major consequences—past the
time when most of us have peaked in making financial decisions.
“Being able to contribute to a dedicated “I don’t understand
emergency savings account through how best to protect my
my employer would make me save investments during an
more for emergencies.” economic downturn.”
70%
workers
35%
retirees
Wells Fargo 2020 Annual Retirement Study Reveal | 7Charting their own course
Women were more vulnerable to the risk of outliving
retirement savings before the economic downturn, and
that financial stress has increased. There may be a silver
lining: access to employer-sponsored retirement plans is
higher for working women than it is for current retirees.
Working women are 2x more likely to feel overwhelmed Access to employer retirement plans:
or paralyzed by their financial lives than men
Men Women
:
Workers Retirees Workers Retirees
73% 63% 73% 42%
2x Retirement savings of working women
is 2x greater than the retirement savings
of women impacted by COVID-19* *COVID-19Impactedarepeoplewhohavebeenlaidofforfurloughed,havehadreducedincome,etc.,duetothepandemic.
8 | Wells Fargo 2020 Annual Retirement Study RevealThe impacts of COVID-19 are varied but
meaningful across generations. Millennials
are saving more, despite the economic
downturn. Boomers and retirees are more
exposed financially. Their FORO (fear of
running out) is real, having lived through
inflation shocks of the 1970s, the dot-com
crash, and the global financial crisis.
Millennial workers Boomer workers Retirees
Started saving more for retirement Will never be able to retire: Worried about how to not run out
due to the pandemic: of money in retirement:
9%
18 % 37%
Started saving for retirement at a much younger Expect to retire at the oldest age, Building an emergency savings account
age (25) than Gen X (30) or Boomers (36): compared with other generations: is among top three financial priorities:
29% 67 years 59%
Wells Fargo 2020 Annual Retirement Study Reveal | 9Avoiding blind spots
Health and wealth have collided in 2020. With savings strained and health care costs rising, the importance
of Social Security and Medicare is magnified—for all generations of workers and wealth levels. What’s less
obvious are the plan details and benefits. Guidance and education can help avoid costly blind spots.
No idea what out-of-pocket health care
No idea how Medicare actually works:
costs will be in retirement:
Boomer
67% workers 43% workers
Percent of retirement income that workers
estimate will come from Social Security: Would feel betrayed if Social Security
weren’t available to them in retirement:
9workers
in 10
30% of income
Making the most of Social Security among top
items to include in retirement planning:
42% retirees
No idea what they would do if Social Security
weren’t there when they needed it:
58% workers
10 | Wells Fargo 2020 Annual Retirement Study RevealNever let a crisis go to waste Dan Prebish
Director, Life Event Services,
Wells Fargo Advisors
Workers and retirees have shown remarkable resilience and optimism,
despite the challenges. But they shouldn’t have to go it alone. Retirement “Retirees have a double-whammy
plan sponsors, financial advisors, and investment solution providers can help. of losing health care coverage
through their employer and
If we take this opportunity to ensure people have resources to help them entering a phase in life where
ride out the current crisis, they’ll be better prepared not just for retirement they can expect higher health
but for future unknowns. For Millennials, that means guidance to calculate care costs. Add to that the
their needs and develop a plan. For Gen X and Boomers, it’s focusing on complexity of Social Security,
asset growth with the right level of risk control. For retirees, a more reliable including when to claim it and
and less complicated income solution is crucial. the impact on taxes. These are
key issues for managing living
expenses. Retirement plan
sponsors and advisors can help
retirees choose the best ways to
access their Social Security and
Medicare benefits.”
Join us in helping people plan
for a better retirement, email:
retirementstudy@wellsfargo.com
Wells Fargo 2020 Annual Retirement Study Reveal | 11About the survey On behalf of Wells Fargo, The Harris Poll conducted 4,590 online interviews, including 2,660 working Americans age 18–76 whose employment was not impacted by COVID-19, 725 Americans age 18–76 whose employment was impacted by COVID-19, 200 high-net-worth American workers age 18–76, and 1,005 retired Americans. Interviews surveyed attitudes and behaviors around planning their finances, saving, and investing for retirement. The survey was conducted August 4–August 24, 2020. Working Americans are 18–76 and working full time (or at least 20 hours if they are working part time) or are self-employed and whose employment has not been impacted by COVID-19. Americans whose employment was impacted by COVID-19 are age 18–76 and selected that they personally experience at least one of the following due to the coronavirus pandemic: laid off from a job, furloughed from a job, started working a reduced or staggered schedule, been given a zero-hour schedule, or taken a pay cut. High-net-worth workers are age 18–76 and have at least $1 million in household investable assets. Retired Americans self-identified as retired regardless of age. All respondents are the primary or joint financial decision-maker for their household. Data are weighted where necessary by age, gender, race/ethnicity, region, education, income, marital status, employment, household size, and propensity to be online to bring them into line with their actual proportions in the population. All investing involves risk, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable. Each asset class has its own risk and return characteristics. This information is for educational purposes only and does not constitute investment, financial, tax, or legal advice. Please contact your investment, financial, tax, or legal advisor regarding your specific needs and situation. The information shown is not intended to provide any suggestion that you engage in or refrain from taking a particular course of action. Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA). © 2020 Wells Fargo & Company. All rights reserved. PAR 0920 - 01037 IHA-6749102
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