2024 DC Retirement at a Glance

1. RETIREMENT CRISIS - The percentage of people globally over the age of 65 will nearly double from 2019 to 2050, and nearly half of Americans between the age of 55 to 65 have no money saved in personal retirement accounts. These trends could lead to a US ‘retirement crisis.’ (Source: BlackRock)
 

2. RETIREMENT GAP - More than 75% of caregivers for children and the elderly are women, and that is a major reason for the 30% gender gap in retirement savings. When making the decision to leave the workforce to raise children, only 33% of women placed a “lot of thought” into how the decision would impact their retirement compared to 20% who “didn’t think of it.” (Source: TIAA)
 

3. LIFE EXPECTANCY GAP - American women aged 65 today have a 52% probability of living to 85, a 30% probability of living to 90, and an 11% chance of living to 95. For men, the probabilities are all lower at 39%, 19%, and 5%, respectively. For couples aged 65, there is only a 20% chance that both members will live to 85, a 6% chance of both living to 90, and less than a 1% chance of both living to 95. (Source: JP Morgan)
 

4. YOLO - 30% of Americans expect to spend more on travel this year than last, and 27% of those would be willing to take on debt to help cover their costs. The willingness to take on debt varies widely with age. While 35% of Millennials (age 28 to 43) would be willing to take on debt to travel, 78% of Baby Boomers (age 60 to 78) would not. (Source: Bankrate)
 

5. 14 YEARS AND COUNTING - The average expense ratio for equity mutual funds¹ fell two basis points in 2023 to 0.42%, marking the 14th straight year of declines. Average mutual fund expense ratios are down 60% since 1996 but are still nearly triple the 0.15% average expense ratio of index equity ETFs. (Source: Investment Company Institute)
 

6. TARGET DATE FUNDS CHEAPER TOO - It’s now cheaper than ever to invest in target date strategies. As of the end of 2023, the average asset-weighted fee of target date funds was 0.30%. That’s down 7 basis points (bps) from 2020 and nearly half the average fee of 58 bps from ten years ago in 2014. (Source: Morningstar)
 

7. BACK TO NEW HIGHS. After dipping in 2022, assets in target date strategies rose to a record $3.5 trillion in 2023. Inflows into target-date strategies totaled $156 billion for the year comprised of $104.5 billion of inflows into collective investment trusts (CITs) and $51.5 billion into mutual funds. Assets in target date strategies are now almost evenly split between CITs with 49% and mutual funds with 51%. (Source: Morningstar)
 

8. FULLY FUNDED - The Milliman 100 Pension Funding Index measures the funded status of the 100 largest defined benefit plans of US public companies. In March 2024, the index increased to 1.0563. The only times in the last 20 years that the largest US pensions were more fully funded were in October 2022 and from May to October 2007. (Source: Milliman, Bloomberg)
 

9. DON’T FORGET THE HSA - Health savings accounts (HSAs) can function as a backdoor retirement investment tool for suitable investors that offer triple-tax benefits of tax-free contributions, taxdeferred growth and tax-free withdrawals along with other features that should be considered. Total assets in HSA accounts increased to $123.3 billion in 2023, representing a 19% increase versus 2022 and the 15th double-digit percentage increase over the last 16 years. (Source: Devenir)
 

QUESTION – RETIREMENT AGES - What is the “Magic Number” for savings that Americans believe would be necessary for a comfortable retirement? The answer can be found by calling an MFS representative.