Retirement confidence is slowly recovering, EBRI survey finds

Americans’ confidence in their ability to afford a comfortable retirement has recovered somewhat from the record lows of the past five years, but appears to be based on the increasing optimism of those who have a retirement plan, according to the 25th annual Retirement Confidence Survey (RCS) conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. Whether or not Americans have a retirement savings plan is a key factor in their outlook about having an affordable retirement.

The survey found that 22% of employees are “very confident” about having enough money for a comfortable retirement, up from 13% in 2013 and 18% in 2014, while 36% are “somewhat confident.” Nearly a quarter (24%) is not at all confident, statistically unchanged from 28% in 2013 and 24% in 2014. In addition, retiree confidence about having a financially secure retirement has also increased. Thirty-seven percent are very confident about having enough money to live comfortably throughout their retirement years (up from 18% in 2013 and 28% in 2014).

Confidence correlated with plan participation

The increased confidence is strongly related to retirement plan participation (including a defined contribution (401(k)-type) plan, defined benefit plan, or an individual retirement account (IRA)), according to the survey. Workers reporting they or their spouse have money in a plan or IRA are more than twice as likely as those without any of these plans to be very confident (28% with a plan vs. 12% without a plan). Specifically, among those with a plan, the percentage of workers who are very confident increased from 14% in 2013 to 24% in 2014 and then to 28% in 2015. In contrast, the percentage of workers who are very confident remained statistically unchanged among those without a plan (10% in 2013, 9% in 2014, and 12% in 2015).

“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.

Obstacles to savings

Cost of living and day-to-day expenses headed the list of reasons why workers do not save (or save more) for retirement, with 50% of employees citing these factors. Nevertheless, many workers say they could save a small amount more. Seven in ten (69%, up from 62% in 2011) state they could save $25 a week more than they are currently saving for retirement. This includes 55% of workers who have not saved any money for retirement.

The survey has consistently found a relationship between the level of debt and retirement confidence. In 2015, just 6% of workers who describe their debt as a major problem say they are very confident about having enough money to live comfortably throughout retirement, compared with 35% of workers who indicate debt is not a problem. On the other hand, 56% of workers with a major debt problem are not at all confident about having enough money for a financially secure retirement, compared with 14% of workers without a debt problem. However, the survey found that workers and retirees are less likely than last year to describe their level of debt as a problem. Fifty-one percent of workers (down from 58% in 2014) and 31% of retirees (down from 44% 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.

Retirement savings needs

The survey found that most employees have not tried to estimate their retirement savings needs. Only 48% (up from 44% in 2014) reported that 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 is statistically comparable to many of the percentages reported from 2008–2014. The likelihood of trying to do a retirement-savings-needs calculation increases with household income, education, and financial assets. Workers who have done a retirement savings needs calculation (compared with those who have not) tend to have higher levels of savings, the EBRI survey noted.

Forty-six percent of all workers think they need to accumulate at least $500,000 by the time they retire to live comfortably in retirement. Nineteen percent say they need between $250,000 and $499,999, while 25% think they need to save less than $250,000 for a comfortable retirement. As might be expected, savings goals tend to increase as household income rises. Despite higher savings goals, workers who have done a retirement savings needs calculation are more likely to feel very confident about affording a comfortable retirement (33% vs. 12% who have not done a calculation).

Source: EBRI press release PR 1121, April 21, 2015; April 2015 EBRI Issue Brief, “The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key Factor in Americans’ Retirement Confidence.”

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