Long-Running Retirement Study Finds Confidence Up, Readiness Down
Because we’re in the profession of preparing clients for retirement, we’re always interested in research that sheds light on how Americans are thinking about (and planning for) their senior years. The longest-running survey of its kind in this field, called the Retirement Confidence Survey, is put out by the Employee Benefit Research Institute (EBRI). We just finished scanning the most recent results and while there is some improvement in the attitudes American workers have toward retirement, there continues to be (in our view) a serious lack of preparation.
If you’d like to read some of the basic findings, click here to read an overview of the EBRI study. The headline on the article summarizes the study by saying that American workers are feeling increasingly confident that they will be able to afford a comfortable retirement. But we think they may be whistling in the dark. According to EBRI, “in the aggregate, only a minority of all workers appear to be taking basic steps needed to prepare for retirement.”
During the recent recession, the percentage of American workers expressing strong confidence that they would be able to afford a comfortable retirement plummeted to a record low. Since 2013, that figure has climbed from 13 percent of respondents to 21 percent this year, a reasonable bounce. On the other end of the spectrum, those workers saying they are not at all confident of being able to afford a comfortable retirement dropped from one in four to one in five. That’s an improvement, certainly, but the sobering fact remains that 20 percent of workers face retirement with serious fear and trepidation.
One reason for this fear is found on one of the fact sheets accompanying the report summary, called Preparing for Retirement in America. It shows the savings rates for workers responding to the Retirement Confidence Survey. Taking into account all household savings (excluding the value of their primary residence), more than half say they have less than $25,000 accumulated, and about one-quarter have $1,000 or less saved. Ironically, fewer than half of respondents report that they have made any real effort to determine how much money they are going to need when they retire. With this head-in-the-sand approach, it seems to us that many of these workers are heading for a rude awakening.
We found this statement in the full EBRI report: “Many workers acknowledge their savings shortfalls for retirement, stating they need to save a sizable, perhaps unmanageable, share of their total household income in order to live comfortably in retirement.” (Emphasis added.) Almost 40% of workers believe they’ll have to save 20% or more of their income, and 22% don’t know how much they should be saving. Not a reassuring picture.
There’s a third fact sheet here titled “Expectations About Retirement.” About one-fifth of workers responding to the Retirement Confidence Survey say they have changed their retirement plans over the past year, with the vast majority reporting they plan to delay retirement. Most have made this change because of the economy, or lack of savings, or need for health insurance. But again the expectation of workers seems to collide with reality, according to the survey: when researchers asked retirees, nearly half had left the workforce earlier than they planned – some by choice, but most due to health problems or loss of employment. About one-quarter of workers say they plan to keep working until age 70 – but the actual number of retirees who did so is dramatically lower, about one in twelve.
The reason we share this information with you here at AgingOptions is simple: retirement requires planning, not wishful thinking. This need to plan is certainly true in the area of finances – but a good plan is also required to ensure that your legal affairs are in order, your housing options have been reviewed, your health care needs are covered and your family is completely informed of your plans and desires. That’s the approach we take here at AgingOptions, with a comprehensive and thorough methodology we call LifePlanning. We would love to show you how LifePlanning can revolutionize your attitude toward retirement and give substance to your hopes and dreams.
Why not take some time to attend a free LifePlanning Seminar? These information-packed sessions are held throughout the Puget Sound region. You’ll find a complete listing plus an online registration form on the Upcoming Events tab on our website – or you can call us for information. Of course, there’s no obligation whatsoever. It will be our pleasure to work with you.
(originally reported at www.ebri.org)