Workers’ and retirees’ confidence has not yet fully recovered from the significant drop seen in 2023, but majorities remain optimistic about their retirement prospects and the lifestyle they envisioned, according to the 34th annual Retirement Confidence Survey, published today by the Employee Benefit Research Institute (EBRI) and Greenwald Research.
Here are some of the key findings from the survey of 2,521 Americans (1,255 workers and 1,266 retirees), the longest running of its kind.
1. Americans concerned about government making retirement changes
Almost 8 in 10 workers and 7 in 10 retirees responded to the survey to say they are concerned the federal government could make significant changes to the American retirement system. Lisa Greenwald, CEO of Greenwald Research, said workers and retirees are concerned that their retirement could be impacted by the government making changes. “In fact, 79% of workers and 71% of retirees have this concern,” Greenwald said. “Inflation’s impact on their retirement also remains a concern among workers and retirees.”
2. Majorities remain optimistic about their retirement prospects and lifestyle
Overall, the survey found two-thirds of workers and three-fourths of retirees are very or somewhat confident about having enough money to live comfortably in retirement, which is unchanged from 2023.
“The survey also shows that workers and retirees are confident that government programs such as Social Security and Medicare will provide benefits of equal value to today and believe they understand the Social Security program,” said Craig Copeland, director, Wealth Benefits Research, EBRI. “Confidence is similar across all ages. But, in some cases, younger workers are actually more confident in certain aspects of retirement. For generation specific results, Boomers and Millennials reported higher confidence in having enough money to live comfortably throughout retirement than Gen Xers.”
While Americans’ confidence has not returned to prior levels, there are signs that it is making a positive recovery as 68% of workers and 74% of retirees are confident they will have enough money to live comfortably throughout retirement. However, this is not a significant increase from last year.
3. Inflation, lack of savings remain top reasons for lack of retirement confidence
Among those who do not feel confident, 31% of workers and 40% of retirees cite inflation as the reason why. Additionally, 39% of workers and 27% of retirees who are not confident feel this way due to their lack of savings.
According to the U.S. Census, wage growth is now outpacing inflation growth. Americans are starting to feel this shift as 28% of workers and 32% retirees who are confident feel that way due to their finances.
4. Social Security remains top source of actual and expected income in retirement
Nearly twice as many retirees (62%) report Social Security is a major source of income than what workers (35%) expect it to be.
Most workers (88%) expect Social Security to be a source of income in retirement. Retirees confirm this sentiment as nearly all (91%) report Social Security as a source of income. However, nearly twice as many retirees (62%) report Social Security is a major source of income than what workers (35%) expect it to be.
While most Americans expect/report Social Security as a source of income in retirement, fewer understand it, but those who understand it are a clear majority. Two-thirds of workers and three-quarters of retirees understand Social Security and the various employment and claiming decisions that impact their retirement benefits at least somewhat well.
While most claim they understand Social Security, fewer than half of workers have reviewed the amount of their Social Security benefits at their planned retirement age, and 59% have thought about how the age at which they claim Social Security will impact the amount they receive. Expectedly, significantly more retirees than workers have completed either task, with 77% having undertaken each.
5. Workers expect to claim Social Security as soon as they retire but also expect to work for pay in retirement
Workers believe they will start claiming Social Security benefits at a median age of 65, which is the same age workers expect to retire. While age 65 has been the historical median age workers expect to retire, significantly more workers (28%) this year expect to retire at age 65.
Retirees, on the other hand, report retiring at a significantly lower age than workers anticipate. Most retirees, 7 in 10, report retiring earlier than age 65, with a median retirement age of 62. Also contradicting workers’ expectations, retirees report collecting Social Security later into their retirement but earlier than workers’ expectations at around age 64.
Similar to last year, half of retirees say they retired earlier than expected. While 2 in 5 retirees who retired early say they did so because they could afford to, nearly 7 in 10 retirees indicate the reason was out of their control.
6. Americans’ retirement calculations result in a desire to save more
Half of Americans have tried to calculate how much money they will need in retirement. In reaction to their calculation, 52% of workers and 44% of retirees started to save more. Even though 7 in 10 workers and nearly 8 in 10 retirees have saved for retirement, this renewed interest in saving is spurred by the drastic difference in what Americans believe they will need for retirement compared to how much they currently have saved.
A third of workers who tried to calculate how much they will need in retirement estimate they will need $1.5 million or more. However, a third of workers currently have less than $50,000 in savings and investments.
As part of their retirement preparations, half of the workers have estimated how much income they will need each month in retirement. While a quarter of workers do not know how much pre-retirement income they will need to replace in retirement, an additional quarter of workers believe they will need to replace 75% or more of their pre-retirement income.
7. Workers want help saving for emergencies through their retirement plan
The ability to save for emergencies is at the top of workers’ list of valuable improvements they would like to see be made to their retirement savings plan.
Two-thirds of workers and almost three-quarters of retirees believe they have enough savings to handle an emergency expense. Additionally, almost half of workers have planned how they will cover an emergency expense in retirement.
However, the ability to save for emergencies is at the top of workers’ list of valuable improvements they would like to see be made to their retirement savings plan. Some Americans are already using their retirement plans to pay for emergencies as nearly 1 in 5 have taken a loan or withdrawal from their retirement plan. Many of those who took money from their plan did so to pay for unforeseen circumstances such as making ends meet (30%), paying for a home or car repair (17%), and covering a medical expense (15%).
8. Workers more likely this year to want to purchase a guaranteed income product with retirement savings
Among workers who are offered a workplace retirement savings plan, one-third believe having investment options that provide guaranteed lifetime income to be the most valuable improvement to their plan. This landed second on workers’ list of most valuable improvements to their plan.
Significantly up this year, more workers who are contributing to their employer’s retirement savings plan, 3 in 10, expect to use savings from their workplace retirement savings plan to purchase a product that guarantees monthly income for life once they retire. This is substantiated by the fact that 83% of workers who are participating in a workplace retirement plan would be interested in using some or all of their retirement savings to purchase a product that guarantees monthly income.
9. While retirement expenses are higher than anticipated, lifestyle in retirement is better than expected
Significantly up this year, over a third of retirees say their travel, entertainment or leisure expenses are higher than they expected.
While half of retirees say their overall expenses in retirement are higher than they originally expected, nearly 4 in 5 say they are able to spend money how they want within reason. Despite higher-than-expected costs, significantly more retirees this year, 3 in 10, believe their overall lifestyle in retirement is better than expected. Additionally, over two-thirds of retirees agree they are having the retirement lifestyle they envisioned. A quarter of retirees strongly agree with this statement.
Read the full EBRI 2024 Retirement Confidence Survey here.
SEE ALSO:
• More Americans Feeling ‘Financially Well’ This Year
• $1.46 Million: New ‘Magic Number’ for a Comfortable Retirement
• Many Older Americans Say They Can Never Retire, AARP Study Finds
• Workers and Retirees Report First Dip in Retirement Confidence Since 2008 Recession: EBRI