The Future of Retirement Savings |Trends and Predictions

Retirement is something many of us look forward to – a time to relax and enjoy life after decades of work. However, saving enough money to fund our retirement years is becoming increasingly challenging. With longer life expectancies, rising healthcare costs, and uncertainty about government benefits like Social Security. Planning for retirement requires forethought and diligence. This article explores the key trends shaping the future of retirement savings and offers predictions on how to successfully prepare.

Trends & Predictions For Retirement Savings

Declining Pensions Mean More Self-Reliance

In the past, many workers could count on pensions from their employers to fund a significant portion of retirement. However, these defined benefit plans are dwindling. According to the Bureau of Labor Statistics, only 13% of private industry workers participated in a pension plan in 2020, compared to 38% in 1979. With fewer pensions available, the responsibility is shifting to individuals to save for their own retirements. This means diligently contributing to retirement accounts like 401(k)s and IRAs.

According to Fidelity Investments, the average 401(k) balance for their 30 million account holders was just $129,300 in Q2 2022 – likely not enough for most to retire comfortably. With pensions disappearing, workers will need to be proactive and maximize their personal retirement savings.

The Uncertain Future of Social Security

Future of Retirement Savings

While Social Security benefits are not meant to replace pensions or personal savings, they do provide an important source of income for many retirees. However, there is concern about Social Security’s solvency in the coming years with 10,000 Baby Boomers retiring every day. According to the 2021 Social Security Trustees Report, the program’s combined trust funds will be depleted by 2034.

If that happens, only 78% of promised benefits will be payable moving forward. With the future of Social Security uncertain, shoring up personal savings is crucial. Retirement planning strategies can no longer count on Social Security as a guaranteed income source. Proactively saving, investing wisely, delaying Social Security benefits, and finding supplemental sources of retirement income are important.

Longer Lifespans Require More Savings

Life expectancies have increased significantly in recent decades. For example, in the US it rose from 69.7 years in 1960 to 76.3 years in 2020, according to the Centers for Disease Control and Prevention. While longer lifespans are a positive trend, they also mean that retirement savings may need to last 20-30 years. Withdrawn savings cannot be replenished like earned income from work.

To prepare, retirement planning strategies should use an assumed lifespan of age 90-95. Saving aggressively, delaying retirement if possible, and utilizing catch-up contributions to retirement accounts can help build the higher nest egg required. Turning savings into guaranteed income streams is also important to cover longer retirements.

Focus on Reducing Debt Before Retirement

Carrying debt like mortgages, student loans, and credit cards into retirement can quickly drain savings. These fixed expenses reduce the disposable income available for other needs. A 2021 Employee Benefit Research Institute survey found that 37% of current retirees carry mortgage debt and 16% carry credit card debt into retirement.

Paying down high-interest debt and striving to be debt-free by retirement is wise. Options include budgeting to make larger payments, consolidating debt into lower-interest options, and downsizing expensive homes. Entering retirement with minimal fixed expenses provides more income flexibility.

The rise of the Gig Economy Requires New Planning

Future of Retirement Savings

The nature of work is changing with more freelancing, contracting, and side jobs making up gig economy work. This non-traditional work often lacks access to employer-provided retirement plans. According to Prudential’s 2022 Pulse of the American Worker Survey, 25% of workers earn income through gig work.

Saving for retirement becomes an individual’s sole responsibility in these situations. Enrolling in low-cost individual retirement accounts like Solo 401(k)s and SEP-IRAs is crucial for retirement security. Gig workers must also budget for self-funded health insurance and disability coverage. Proactive planning is essential.

Investing More Conservatively as Retirement Nears

Retirement savings invested too aggressively in stocks and equities can be devastated by market declines. As retirement nears, most financial planners recommend shifting savings to more conservative investments like bonds and cash. This protects savings from volatility while still providing some growth potential.

Determining the right asset allocation mix based on time horizon and risk tolerance is key. Options like target date funds automatically adjust asset allocations, becoming more conservative over time. Nearing retirement, locking in gains from stocks while reducing exposure helps secure savings.

Rise of Remote Work and Retirement Abroad

Remote work has risen dramatically, fueled by the COVID-19 pandemic. This gives some pre-retirees and retirees the flexibility to live abroad where costs are often much lower. Expat retiree havens like Costa Rica, Panama, Portugal, and Thailand provide a high quality of life for much less.

Even cheaper locations within the US like Mexico can stretch retirement savings further. Healthcare costs are often dramatically lower too. Geographic arbitrage lets retirement savings go farther while still collecting US Social Security and retirement plan income. Living abroad part-time is also an option. The rise of remote work expands retirement possibilities.


Planning for future of retirement savings is critical but also challenging in today’s environment. Following these trends and proactively saving, reducing debt, and investigating creative options like expat living can help position yourself for retirement success. As pensions decline and uncertainty surrounds government benefits, taking control of your own retirement planning is more important than ever before.

FAQs About the Future of Retirement Savings

How much should I save for retirement?

Most experts recommend saving 10-15% of your income for retirement, including any employer contributions. Aim to save at least 15 times your ending salary by retirement age. Use online calculators to determine the right target amount based on your estimated costs, Social Security benefits, and years until retirement.

What is the average 401(k) balance by age?

According to Fidelity Investments, the average 401(k) balance was $129,300 in Q2 2022 across all age groups. By age group, the average balances were: $46,000 for ages 20-29, $122,900 for ages 30-39, $182,100 for ages 40-49, $197,500 for ages 50-59, and $202,900 for ages 60-69.

How can I catch up on retirement savings if behind?

If behind on saving, utilize catch-up contributions to 401(k)s and IRAs which allow those 50+ to contribute an extra $6,500-$7,000 per year. Reduce expenses and budget more for savings. Delay retirement a few years to allow more time for compounded investment gains. Look into ways to generate supplemental retirement income.

What percentage of income do Social Security benefits replace?

For lower-income Americans, Social Security benefits may replace 60% or more of pre-retirement income. But for most, it replaces only about 40% of pre-retirement income. Social Security was never meant to fully replace wages but rather supplement retirement savings.

When should I start taking Social Security benefits?

You can take reduced Social Security benefits as early as age 62 or wait until age 70 to maximize benefits. For most, taking benefits between full retirement age (66-67) and age 70 provides the best lifetime value. However, if you have little savings or health issues, claiming earlier may make sense.

What investments should I hold in retirement?

Retirement investments should focus on asset preservation while still providing some growth to keep pace with inflation. Bond funds, dividend stocks, annuities, cash, and low-volatility funds are good options. Most experts suggest at least some equities until age 75-80 to protect from inflation.

A Ahmad
A Ahmad

A Ahmad, a certified financial planner, Retirement Step was created to share over two decades of retirement planning experience with readers looking to take control of their financial futures.

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