Retirement savers are willing to put in more work — literally — to keep Social Security afloat.
Nearly 6 in 10 people under 55 said they would work two years or more to keep Social Security funded, according to a recent Bank of America Research Investment Committee (RIC) survey of 2,500 savers (two-thirds were under 55 and and more than three-fourths had incomes below $100,000).
On average, respondents said they’re already planning to work until 68 or 69. Millennials and Gen Z already plan to work and save longer. Just 8% of those aged 35-44 plan to retire by 67, according to the survey.
Workers don't expect that “Social Security is going to get the job done for them,” Jared Woodard, head of RIC at Bank of America, told Yahoo Finance Live (video above). “And many workers said that if it would keep Social Security solvent, they'd be willing to work a few extra years.”
Concerns about the future of Social Security are top of mind
JJ Gouin via Getty Images
Foreboding about losing Social Security benefits runs deep. For instance, more than 7 in 10 workers agreed with the statement: “I am concerned that when I am ready to retire, Social Security will not be there for me,” according to a survey by Transamerica Center for Retirement Surveys.
But Social Security is not vanishing.
The main Social Security trust fund will continue paying out full benefits through 2034. At that time, payroll taxes will cover 77% of scheduled benefits unless there are reforms to the Social Security program, according to the annual report from the trustees of the programs.
“Workers know that it's important,” Woodard said. “They're leaning much more on their private retirement accounts, 401(k)s and so on. But our data suggests that workers would actually be quite pragmatic about a policy solution.”
Boosting retirement account contributions
Another game changer on the horizon for retirees is the SECURE Act 2.0, which has a provision that requires 401(k) and 403(b) plans to automatically enroll participants when they become eligible and includes a ramped up catch-up IRA contribution for people 50 and over that would be indexed for inflation. And the act raises catch-up contribution limits to $10,000 for employer-sponsored retirement plans for those 62-64, up from the current $6,500.
“The SECURE 2.0 Act, an act that's been a little bit under the radar this year, has broad bipartisan, in fact, almost unanimous support in Congress, would do some really positive things for retirees, for workers, and actually for the financial markets overall if it passes either late this year or early next year,” Woodard said.
Moreover, the pending legislation pushes back the Required Minimum Distributions (RMDs) —the amount of money that must be withdrawn from tax-deferred retirement plans and taxed–to age 73 in 2022, to 74 in 2029, and to 75 in 2032.
Another finding in the Bank of America Institute’s survey that bodes well: “People are focused more than ever on making smart investment decisions for retirement,” Woodard said. “We asked, if you had more capital that you were going to allocate to retirement today, where would you put it? The number one answer was, not too surprisingly, equities (58%). Number two is alternatives (42%). The least likely place folks were willing to put fresh retirement investments was in fixed income (33%).”
That’s encouraging, particularly for those savers with decades to retirement. The reality is that stocks come with a higher level of risk, and are hard to stomach in a year like this with the S&P 500 down 19.61%, the Dow Jones Industrial Average dropping close to 14.73%, and the Nasdaq Composite collapsing 22.83%. Yet stocks have generally outperformed other types of investments over time.
“I think what's most important is that people are able to navigate these markets to stay invested,” Woodard said, “ and to avoid short-term decisions that might end up having a more negative effect than anything that happens in the real economy,”
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon