Seemingly shell-shocked by economic and stock market volatility that has wreaked havoc on many Americans' savings, roughly half of non-retirees now question whether 401(k), 403(b) and 457 plans are adequate ways to save for retirement, according to a new survey.
Moreover, 27% or retirees now actually feel that the safest place for any money left over after paying expenses is underneath their mattress, according to the survey by Minneapolis-based Allianz Life Insurance Company of North America.
The survey also indicated that more Americans are cutting back on saving for their children's education, with 25% saying they have either reduced or stopped saving altogether for college.
Among non-retirees, 47% feel their retirement savings habits have been impacted by the current economic environment. Nearly 20% have reduced spending on other things to keep saving for retirement at the same rate, and 30% have either decreased the amount they've been saving for retirement or have stopped saving altogether. Additionally, 28% have not even started saving for retirement at all.
"Given the gut-wrenching events and market volatility of late summer, consumers are questioning traditional retirement savings vehicles and changing their savings habits," said Katie Libbe, vice president of Consumer Insights at Allianz Life.
Recent events have only deepened the uncertainty many have felt about retirement since the market meltdown of 2008,when the average 401(k) account balance lost nearly 30% of its value, Libbe noted.
Sixty-one percent of non-retirees own investment/retirement savings products such as employer-sponsored retirement plans (ESRPs), stocks/bonds/mutual funds, pensions or annuities; 39% do not own any of these, according to the survey.
Topping the list of investment/retirement savings products are ESRPs 401(k), 403(b) and 457 plans, with 47% of non-retirees owning them. Stocks, bonds or mutual funds outside of ESRPs are held by 27%.
The economic environment is also leading to cutbacks in college savings, according to the survey. While 25% are contributing less or have stopped saving entirely, 40% say they have not started saving for their children's college education at all. An estimated 15% say they have reduced spending on other things to keep saving/paying for their children's college educations.
"This could mean that students will have to be more creative in their use of grants and loans in order to make up potential shortfalls," Libbe said.
Forty-six percent of non-retirees feel saving for retirement is an equal priority to saving for their children's college education. While 22% feel saving for college takes priority over retirement, 32% think otherwise, ranking retirement as a higher priority.
"Retirement and college savings often draw from the same bucket of available funds, and people have a hard choice to make," said Libbe. "Our research shows that lower income households feel paying for their children's education takes priority over saving for their own retirement."
The study also found that between the sexes, 39% of men placed saving for their own retirement ahead of saving for their children's college education, versus 27% of women. Conversely, 53% of women felt that retirement and college savings were equal priorities, versus 37% of men.
"The toll taken by recent economic volatility has yet to be fully calculated, but one thing is certain: it has directly impacted how people are approaching saving for retirement and college," Libbe said.
-Jim McConville