Do nothing and wait—it will happen eventually. Sadly, that seems to be the attitude of the American worker, according to a new survey from Employee Benefit Research Institute and Matt Greenwald. EBRI reports individuals are expressing higher retirement confidence about their ability to afford retirement this year, even though there is little sign they’ re taking the necessary steps to achieve that goal.
A key factor in American’s outlook on retirement is whether or not they have a retirement savings plan. Retirement confidence continues to rebound from the record lows experienced between 2009 and 2013, and the increasing optimism is a result of those who indicate they and/or their spouse have a retirement plan, such as a defined contribution (401(k)-type) plan, defined benefit (pension) plan, or individual retirement account (IRA).
“Those without a retirement plan seem to understand they are likely to have difficulties accumulating adequate financial resources for retirement: 44 percent of workers without a retirement plan are not at all confident about having enough money for a comfortable retirement, compared with only 14 percent of those who have a plan,” said Jack VanDerhei, EBRI research director and co-author of the report.
The percentage of workers confident about having enough money for a comfortable retirement—again, at record lows between 2009 and 2013—increased in 2014 and again in 2015. Twenty-two percent are now very confident (up from 13 percent in 2013 and 18 percent in 2014), while 36 percent are somewhat confident.
Overall, 24 percent are not at all confident (statistically unchanged from 28 percent in 2013 and 24 percent in 2014).
However, this increased confidence is based on those indicating they have a retirement plan. Worker confidence in the affordability of various aspects of retirement has also rebounded. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses has increased (37 percent, up from 25 percent in 2013 and 29 percent in 2014). The percentages of workers who are very confident in their ability to pay for medical expenses (18 percent, up from 12 percent in 2011) and long-term care expenses (14 percent, up from 9 percent in 2011) are slowly inching upward.
Confidence among retirees (which historically tends to exceed worker confidence levels) also increased in having a financially secure retirement, with 37 percent very confident (up from 18 percent in 2013 and 27 percent in 2014).
The percentage not at all confident was 14 percent (statistically unchanged from 14 percent in 2013 and 17 percent in 2014).
Workers are somewhat more confident that they are doing a good job of preparing financially for retirement:
25 percent are very confident in 2015 (up from 17 percent in 2013). Overall, about two-thirds are somewhat or very confident about their financial preparations, while one third (32 percent) indicate they are not confident.
However, for workers without a retirement plan, savings remain low and only a minority appears to be taking basic steps needed to prepare for retirement. Only 23 percent of those without a retirement plan have done retirement needs calculation and 64 percent without a retirement plan say they have saved less than $1,000.
Among the other findings in this year’s survey:
Saving for retirement: Sixty-seven percent of workers report they or their spouses have saved for retirement (statistically equivalent to 64 percent in 2014), although nearly 8 in 10 (78 percent) full-time workers say that they or their spouse have done so. Among those who indicate they and their spouse have a retirement plan, such as an IRA, DC or DB plan 35 percent report having saved at least $100,000 compared with just 3 percent of those who do not have a retirement plan.
Why not saving: Cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 50 percent of workers citing these factors. Nevertheless, many workers say they could save a small amount more. Seven in 10 (69 percent) state they could save $25 a week more than they are currently saving for retirement.
Debt worries dropping: Both workers and retirees are less likely than in the 2014 RCS to describe their level of debt as a problem. Fifty-one percent of workers (down from 58 percent in 2014) and 31 percent of retirees (down from 44 percent in 2014) indicate they have a problem with their level of debt. The types of debt most frequently reported are mortgages, credit card debt, and car loans.
“It is significant that fewer people report having a problem with debt than in the past few years,” said Greenwald. “This could indicate progress in addressing this issue and suggests there is more emphasis on debt reduction than on saving for retirement.”
Planning for retirement: Almost two-thirds of workers (64 percent) say they feel they are behind schedule when it comes to planning and saving for retirement. However, this assessment may not be based on a careful analysis of their individual circumstances. Only 48 percent of workers report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement, a level that has held relatively consistent over the past decade.
See Also:
- Employers Overestimate Employee Retirement Confidence
- Retirement Confidence Has Remained ‘Below Average’ Since 2022
- Caregivers Worried LTC May Impact Retirement Confidence
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
