The $6.6 Trillion Retirement Savings Gap

Although workers in America claim they have learned from the experiences of current retirees, they've fallen behind the curve when it comes to retirement. The vast majority aren't sure they're saving enough to live comfortably during their golden years.

Although workers in America claim they have learned from the experiences of current retirees, they’ve fallen behind the curve when it comes to retirement, according to a report by BlackRock, Inc.

Through its poll of 1,035 retired Americans and 1,002 working Americans participating in defined contribution (DC) retirement plans, BlackRock estimated that difference between what people have saved and what they need to save for retirement is $6.6 trillion.

Furthermore, 58% of workers are not saving the maximum amount of money permitted by their 401(k)s. Less than a third (27%) of retirees said they didn’t save as much as they could have and almost 80% of them regret that.

"When it comes to 'lessons learned,' the message from today's retirees to today's workers is straightforward: Make a plan for retirement saving early and, above all, save as much as you possibly can," Chip Castille, managing director and head of BlackRock’s U.S. and Canada DC Group, said in a statement.

While 51% of retirees are confident about having enough money to live comfortable during retirement, only one quarter of workers are confident about having enough. And even less workers (14%) are very confident that they are saving enough so that they’ll have the monthly income they want during retirement.

Although many workers don’t even consider age when they save and plan for retirement, BlackRock promoted a target date fund, which becomes more conservative as time goes by so workers lessen the chance of losing money close to retirement. Younger workers, ages 25 to 34, are actually more interested in the tool with 44% finding it appealing compared to only 29% of those ages 55 to 59.

The target date fund’s investments are automatically rebalanced and reallocated over time to reflect the new strategies of workers as they approach retirement. However, there are fundamental differences in target date strategies. According to Castille, the funds’ various objectives and investment approaches can impact investment performance as well as a fund's suitability for a particular participant population.

"Not all target date funds are created equal," Castille said. "Proper due diligence aligned with good understanding of plan and participant realities can help a sponsor ensure that their target date fund well supports their employees' essential savings objectives."