Less than Half of Non-Retired Americans Confident They’ll Reach Financial Goals by Retirement: AICPA Survey

Golden Years Lose their Luster as Vast Majority Anticipate
Financial Sacrifices in Retirement

NEW YORK–(BUSINESS WIRE)–During the decades spent waking up early and heading to work, it’s
understandable that Americans might view retirement as a light at the
end of the tunnel. However, the retirement most Americans now envision
is one of financial sacrifice, as the golden years run the risk of being
tarnished without better planning. That’s according to a new telephone
survey conducted for the American Institute of CPAs (AICPA) by Harris
Poll in March 2017 among 1,018 adults in support of National Financial
Capability Month.

The survey found that only 46 percent of non-retired Americans are
confident they will reach their retirement goals, compared with 49
percent who are not confident (29 percent not sure, 20 percent don’t
think they ever will). Only five percent of non-retired Americans
reported that they had already reached their retirement goals.

This lack of overall confidence tracks with anxiety about the financial
aspects of retirement – with two-in-five non-retired Americans (42
percent) saying they are either very anxious (14 percent) or somewhat
anxious (29 percent). When these Americans were asked the specific cause
of their anxiety, healthcare cost (71 percent), healthcare uncertainty
(68 percent), affording everyday expenses and bills (67 percent), Social
Security uncertainty (62 percent) and uncertainty over tax rates (52
percent) were all cited by more than half. In addition, figuring out how
much money will be required in retirement (70 percent) and the overall
difficulty of planning for retirement (54 percent) are causing anxiety
for a substantial percentage of non-retired Americans.

“Saving for retirement is a marathon, not a sprint. By establishing a
monthly budget and starting to build up savings early on, Americans will
find themselves in a much better position later on,” said Greg Anton,
CPA, CGMA, and chair of the AICPA’s National CPA Financial Literacy
Commission. “The most important thing people can do in any financial
environment is focus on what they can control and understand the role
that their actions play in their retirement plan.”

The traditional ‘three-legged stool’ model of retirement planning
involves Social Security, a pension and personal savings, including
401(k) and IRAs. The survey found that, among those currently retired,
the model holds up well – with these Americans citing Social Security
(61 percent), pension plans (36 percent) or cash or savings accounts (25
percent) as their top two sources of income in retirement.

However, for non-retired Americans, anxiety over Social Security and a
sharp decrease in company pensions may have led to an increased emphasis
on personal savings – leaving the three-legged stool a bit unstable.
Overall, for non-retired Americans the percent who anticipate relying
upon Social Security (48 percent) or a pension plan (17 percent) as one
of their top two primary sources of income differs significantly, with a
more likely dependence on cash or savings accounts (39 percent). And
non-retired Americans are more than three times as likely as those who
are retired to say they expect to rely upon a 401(k) (43 percent vs. 14
percent) as one of their two primary sources of income during retirement.

“Working throughout your life was once a reliable route to a
comfortable, financially secure retirement. Over the years, Americans
have been asked to take on more responsibility and become more
self-sufficient when it comes to their retirement planning,” said Anton.
“We’ve found that today, even Americans who say they’ll reach their
financial goals are anticipating a more active ‘retirement-lite’ that
involves working and making financial sacrifices.”

Overall, non-retired Americans are more likely than those who are
currently retired to plan on making at least one financial sacrifice in
retirement (92 percent vs. 72 percent). In fact, non-retired Americans
are more likely to anticipate a sacrifice in every category, including:

Working full-time longer than expected (45 percent non-retired vs. 11
percent retired);
Working a part time job (43 percent non-retired
vs. 17 percent retired);
Moving to a less expensive city or town
(40 percent non-retired vs. 22 percent retired);
Forgoing medical
care or treatment (28 percent non-retired vs. 14 percent retired).

In addition, non-retired Americans are almost four times as likely as
retired Americans (31 percent to 8 percent) to say that they’ll have to
support their parents.

As life expectancies have gotten longer, retirement planning has become
more difficult. To help Americans reduce the amount of financial
sacrifices necessary in their golden years, the AICPA’s National CPA
Financial Literacy Commission has the following tips:

• A 401(k)
  can be one of your best tools for creating a secure retirement. They
  provide two key advantages. First, all contributions and earnings to
  your 401(k) are tax-deferred, meaning you only pay taxes on
  contributions and earnings when the money is withdrawn. Second, many
  employers provide matching contributions to your 401(k) account. If
  your employer does this, try to at least contribute the amount that
  gets you the maximum match; to do otherwise is to walk away from “free
  money.” To help you incorporate a 401(k) into your retirement
  planning, the 360 Degrees of Financial Literacy website provides this easy-to-use
  calculator.
• Another smart tool for the personal savings leg of your retirement’s
  “three-legged stool” is a Roth IRA. If you plan on being in a higher
  tax bracket come retirement than you are presently, this is a good
  choice because you are only taxed up front. Withdrawals made after the
  age of 59 ½ for Roth IRA accounts open longer than 5 years are not
  taxed. The 360 Degrees of Financial Literacy website has created a special
  section dedicated to IRAs with articles, calculators and answers
  to common questions.
• Keep debt to a minimum; interest charges on credit cards, car loans
  and other borrowing can take a substantial chunk out of the funds that
  would otherwise build your retirement nest egg.

360 Degrees of Financial literacy (www.360finlit.org)
is a national volunteer effort of the nation’s Certified Public
Accountants to help Americans understand their personal finances and
develop money management skills. The AICPA and Ad Council have developed
the Feed
the Pig program (Feed the Pig), a national and localized PSA
campaign designed to improve financial literacy among Americans aged
25–34 by encouraging them to make savings a part of their daily lives.

Survey Methodology

This Harris Poll was conducted by telephone within the United States
between March 24 and 27, 2017, among 1,018 adults (505 men and 513 women
aged 18 and over) including 518 interviews from the landline sample and
500 interviews from the cell phone sample. 650 adults self-identified as
“non-retired” and 322 as “retired”. Figures for age, sex,
race/ethnicity, education, region and household income were weighted
(using data from the Current Population Survey) where necessary to bring
them into line with their actual proportions in the population.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member
association representing the CPA profession, with more than 418,000
members in 143 countries, and a history of serving the public interest
since 1887. AICPA members represent many areas of practice, including
business and industry, public practice, government, education and
consulting. The AICPA sets ethical standards for the profession and U.S.
auditing standards for private companies, nonprofit organizations,
federal, state and local governments. It develops and grades the Uniform
CPA Examination, offers specialized credentials, builds the pipeline of
future talent and drives professional competency development to advance
the vitality, relevance and quality of the profession.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and
Ewing, NJ.

About the Association of International Certified Professional
Accountants

The Association of International Certified Professional Accountants (the
Association) combines the strengths of the American Institute of CPAs
(AICPA) and The Chartered Institute of Management Accountants (CIMA) to
power opportunity, trust and prosperity for people, businesses and
economies worldwide. It represents 650,000 members and students in
public and management accounting and advocates for the public interest
and business sustainability on current and emerging issues. With broad
reach, rigor and resources, the Association advances the reputation,
employability and quality of CPAs, CGMAs and accounting and finance
professionals globally.

Contacts

AICPA
James Schiavone, 212-596-6119
James.Schiavone@aicpa-cima.com
or
Jonathan
Lynch, 212-596-6033
Jonathan.Lynch@aicpa-cima.com