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Assessing Americans’ Financial & Retirement Security

Assessing Americans' Financial and Retirement Security is a comprehensive analysis by ACLI that presents a high-level snapshot of Americans' current state of financial and retirement security. The analysis offers a detailed definition of financial and retirement security across different generations and stages of life, and provides valuable insight into how Americans rely on both public and private sector solutions to prepare for the future. 

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The analysis finds that the majority of U.S. households – 65 percent – are practicing good financial behaviors and utilizing the correct products and tools to ensure their financial security, or can be on track to become financially secure with modest changes to their current behaviors. 

In general, the most financially secure American households practice good financial habits, have a financial plan, maintain an emergency fund, effectively manage risk, make smart use of debt, regularly save a portion of their earnings, and have a retirement income plan that includes guaranteed lifetime income they cannot outlive. These households consistently make good use of private sector financial and retirement solutions as strong and reliable support throughout their lives. 

Studying the financial habits of different households provides valuable insight into how Americans rely on both public and private sector solutions to prepare for the future. Policymakers and thought leaders in the retirement security space should consider the full analysis findings when developing policy and consumer education efforts to help more families achieve financial and retirement security. 

Read the full report (PDF).

Assessing Americans' Financial and Retirement Security summarizes the preparedness level of households in three overarching categories:

  • On track to a financially secure future
  • Needs some improvement to be on track to a financially secure future
  • Needs significant improvement to be on track to a financially secure future
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Millions of American households are on track to a financially secure future as a result of making balanced and informed decisions about spending and saving, having a financial plan and working to build long-term savings, and taking steps to protect their families against life’s many risks.

Data shows that while there is room for improvement, those who utilize private sector solutions are better prepared financially for the future. The role of the private sector will continue to increase in importance as individuals live longer and become more responsible for savings that will provide their income during retirement.

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A significant finding of the analysis was that small, consistent actions by households can dramatically improve their financial and retirement security in a matter of years.

Assessing Americans' Financial and Retirement Security closely examines current financial behaviors and habits among various population groups, recognizing that households have unique and ever-evolving characteristics and priorities. Financial factors that are critically important for a household at a particular point in time may be significantly more or less important as they progress through life. As needs change, households must constantly monitor and adapt their plans to ensure retirement security.

To account for varying life stages and circumstances, the survey population of approximately 4,500 households was segmented into 13 groups that differ by age, number of dependents, home ownership, and whether the head of household is retired. A standard was defined to measure the degree of financial and retirement security of each cohort based on fixed-weight and variable-weight indicators. 

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Assessing Americans' Financial and Retirement Security is unique in its comprehensive nature and specific focus on life stages and household financial behaviors and habits. In addition to considering retirement savings balances, the analysis takes into account annual contributions to retirement, emergency and other savings, effective management of home equity, credit cards, student loans, and consumer debt, financial and estate planning, participation in defined benefit plans, ownership of annuities to guarantee lifetime income, life and disability income insurance coverage, and preparation for longterm care. 

The extensive nature of this analysis creates a holistic and highly reliable measure of financial and retirement security.

Strong public policy can help Americans prepare for their financial future. Assessing Americans' Financial and Retirement Security highlights the importance of sound financial decisions at every age to the quality of life and well-being of American families.

To ensure Americans have the tools and information they need to make good financial decisions, public policy should seek to enhance financial education and increase access to essential financial protection and retirement savings options that encourage Americans to save for retirement, such as workplace savings plans and IRAs.

The need to improve financial literacy has long been recognized by Congress and the Administration. Policymakers can help Americans develop a basic understanding of financial risk, how to build savings, and how to assess their retirement income needs. The implementation of a national strategy for financial literacy and education would help Americans recognize the importance of retirement savings and understand how insurance products help families manage risk and protect savings.

Smart public policy will also encourage access to the broad set of solutions offered by the private sector that empower Americans to address their financial protection and retirement needs. Products such as life insurance, disability income insurance, longterm care insurance, and annuities serve a critical role in enabling families to protect themselves from risk, more easily save money, and adequately supplement the public sector disability and retirement income benefits earned and provided through Social Security. For millions of Americans, these are indispensable elements that provide lifetime financial security and peace of mind.

While improvements to public policy can greatly enhance access to private sector financial and retirement solutions, many households can take steps today to dramatically improve their financial and retirement security in the near future.

Households can effectively “get on track” by adhering to a financial plan that outlines steps to increase emergency savings, reduce debt, and begin (or increase) contributions to a retirement plan or similar long-term investment.

Individuals should also take common sense measures to protect themselves and their families from life’s greatest risks, ensuring they have disability income insurance to protect their ability to earn an income and life insurance to support their family in the case of their death.

At all times, households should feel empowered to turn to experts in the private sector, including life insurers and financial professionals, for financial planning and guidance on how to protect their families, improve their finances, and secure their retirement.

Additional Resources

Time for Congress to Protect Private-Sector Safety Net
Morning Consult, Sept. 2017
Op-ed by Governor Dirk Kempthorne, ACLI President & CEO

Why Salary Doesn't Equal Financial Security 
LinkedIn, Sept. 2017 
Article by Alane Dent, ACLI Acting Senior Vice President, Federal Relations

New Research Showing Path to Financial Security
Faegre Baker Daniels 'The Insurance Interview,' Sept. 2017
Podcast interview with Governor Dirk Kempthorne, ACLI President & CEO