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Building a bridge to span decades of retirement

With life expectancy growing, the longevity challenge is real: How do workers prepare for a retirement that’s more easily counted in decades than years? In our tenth annual survey, we spoke to plan participants and retirees to learn how they’re feeling about their finances, and how retirement reality compares to retirement dreams. By understanding the gap, we can help participants build a bridge that covers their potential decades of retirement.

Three generations laughing together.

The relationship between financial resilience and longevity 

Even accounting for the pandemic, Americans are living longer, healthier lives. Between 1950 and 2021, the portion of the population older than 65 nearly doubled.1  Life expectancy is close to 80, and the number of Americans living 100 years or more is expected to quadruple in the next 30 years. 

When the retirement age was 65 and life expectancy was 68,2 retirement planning accounted for a few years. Longevity can bring with it lots of positives: more time to spend with friends and family and enjoying life. It can also bring more decades to pay for living and healthcare expenses. 

Building financial resilience in our working years may be more critical than ever as we prepare to live three or more decades. This means being able to navigate financial realities such as debt, college costs, healthcare expenses, and emergencies without derailing retirement savings. Plan sponsors, financial intermediaries, and recordkeepers often play a key role, offering workplace retirement plans supported with financial wellness resources and education.  

Delaying retirement can help both sides of the equation

As we see every year, the closer people get to retirement, the better they are at managing their financial stressors—and that holds true, even in retirement. Some people end up retiring later than they’d planned, however, and others earlier. Retirees who retired as planned or later experience the lowest level of financial stress among all generations, and they’re the most optimistic about their retirement savings. 

The picture for people who retired earlier than they’d planned, however, is very different.

  • Nearly 40% are more stressed now than when they were working
  • Over half are unhappy with their financial situation  
  • 72% wish they’d saved more for retirement
  • A third are relying solely on Social Security as their source of income 

An individual’s retirement age affects both how much time he or she has to save and how long his or her money may need to last. While workers often have an age in mind, many end up retiring earlier. We discovered that 62% of retirees left the workforce sooner than they’d expected—on average, at age 58 versus their ideal age of 63. This simultaneously shortens their savings period and extends their retirement years.

Retirement timing: expectations vs. reality

  Workers Retirees
Earlier than planned 9% 62%
About when planned 43% 30%
Later than planned 32% 3%

Although early retirees need some extra care, Americans are enjoying retirement 

Retirement—like life—has its ups and downs. But the good news is that more than three-quarters of retirees are enjoying themselves. They’re generally doing what they’d expected, although far fewer are traveling than anticipated. Almost half say it’s given them a chance to pursue a passion they hadn’t had time to do before. 

But there's a flip side. Six in ten have had to adjust their lifestyle to their cost of living. And although 22% say their social circle has grown, 33% are concerned that their social circle is smaller—a reminder that retirement planning should account for more than just finances. 

Graph shows a comparison of how workers anticipate spending their time in retirement versus how retirees actually spend their time.

Smart investing can help savings stretch 

With extended time in retirement to plan for, workers need to consider maximizing their saving years and investing wisely. But although older workers and retirees are more knowledgeable about investments than younger workers, there’s still room for improvement. Less than 6 in 10 retirees are knowledgeable about investments. 

Retirees are mostly receiving retirement income from annuities and pension plans, but a quarter are only living on Social Security. Reflecting the shift toward defined contribution (DC) plans, most workers we surveyed expect to rely on a 401(k) or 403(b) in retirement. 

Sources of retirement income in addition to Social Security Retirees Workers
Annuities 40% 50%
Pension plan 36% 29%

No additional income sources

 26% 3%

401(k) or 403(b)

 24% 84%
IRAs 21% 39%

Saving/checking account

 18% 26%
Other investment accounts 16% 15%
Other 11% 9%

This illustrates the importance of getting people into a DC plan and educating them about investing for the long term. Generally, workers and retirees appear to be following a glide path from more risk to less risk over time. But if a typical glide path provides for 70% to 80% equity exposure when retirement is decades away, it appears that the younger generations could benefit from learning more about diversification strategies.

How the generations have invested their retirement accounts

  Gen Z/millenials Gen X Baby boomers Retirees
Low risk: Lower potential return, lower chance of loss 17% 14% 25% 40%
Medium risk: Medium potential return, medium chance of loss 43% 51% 54% 33%
High risk: Higher potential return, higher chance of loss 23% 19% 12% 4%

How we can help Americans enjoy their longevity bonus

Having more years to enjoy after working can be a wonderful adventure, which is why it’s referred to as a longevity bonus. But this also means Americans not only need to consider retirement plans, they also need help saving and investing so they can reach their goals. There’s no magic wand, but by rallying around what I call the five A’s, I think we can help people get there. 

  • Access—Access to workplace retirement plans is foundational for Americans to be able to save, and they can be supplemented with state-sponsored plans.
  • Auto—Auto features have generally been highly successful at solving for inertia and getting people saving in a plan, and SECURE 2.0 was a nice step forward, requiring auto-enroll and auto-increase in most new plans. 
  • Activation—While auto features get people in a plan, inertia lingers until we get participants actively involved in their plans. Personalizing communications, engagement, and education can help with relevant and timely nudges to take action.
  • Alpha—Tax-deferred investment compounded returns may be close to a magic wand, but it doesn’t do the trick when participants’ investment strategies aren’t suitable for their age and risk tolerance. Participant education and engagement should usually start with investment basics and include asset allocation and diversification strategies. 
  • Advice—To help with alpha, our research shows that participants who work with a financial professional feel better about their finances, are better prepared for retirement, and have less financial stress in their lives. 

For more insight from our 10th annual survey, download our Financial resilience and longevity report.3

 

 

 

1 Our World in Data, July 2024. 2 https://www.macrotrends.net/global-metrics/countries/USA/united-states/life-expectancy. 3 2024 John Hancock Financial resilience and longevity report, a commissioned study.

 

John Hancock’s 10th annual financial resilience and longevity survey, John Hancock, Edelman Public Relations Worldwide Canada Inc. (Edelman), June 2024. This information is general in nature and is not intended to constitute legal or investment advice. Edelman and John Hancock are not affiliated, and neither is responsible for the liabilities of the other. This report presents the results of research conducted by Edelman on behalf of John Hancock. The objectives of this study were to (1) quantify the financial situation and level of financial stress of John Hancock plan participants and American retirees; (2) determine the key triggers of financial stress; (3) understand the extent to which actions, including actual financial behavior and planning activity, ameliorate stress; (4) assess longevity and retirement preparation and readiness; and (5) investigate custom insight around how retirees are faring in retirement. This was an online survey comprising two participant samples: John Hancock plan participants and American retirees. The John Hancock plan participant sample comprised 2,623 John Hancock plan participants. The survey for this sample was conducted from 5/17/24 through 6/3/24, with an average survey length of approximately 18 minutes per respondent. Respondents were located from a list of eligible plan participants provided by John Hancock. The American retiree sample comprised 525 retired Americans, sourced through Angus Reid’s research panel. The survey for this sample was conducted from 5/13/24 through 5/28/24, with an average survey length of approximately 12 minutes per respondent. All statistical testing is done at 0.95 significance levels. Percentages in the tables and charts may not total to 100 due to rounding and/or missing categories.

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Wayne Park

Wayne Park, 

CEO, John Hancock Retirement

John Hancock Investment Management

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