Retirement confidence remains low, EBRI reports

Americans’ confidence in their ability to afford a comfortable retirement remains low, according to the 23rd annual Retirement Confidence Survey, conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Inc. The percentage of workers confident about having enough money for a comfortable retirement is essentially unchanged from the record lows observed in 2011, the survey reports.

While more than half express some level of confidence (13% are “very confident” and 38% are “somewhat confident” of being able to afford a comfortable retirement), 21% are “not too confident,” and 28% are “not at all confident.” The latter figure is the highest level of those not at all confident recorded during the 23 years of the survey, the EBRI said.

Aggressive savings targets

One reason that retirement confidence has remained low despite a brightening economic outlook is that some workers may be waking up to just how much they may need to save, the EBRI noted. Asked how much they believe they will need to save to achieve a financially secure retirement, a striking number of workers cite large savings targets: 20% say they need to save between 20−29% of their income and nearly one-quarter (23%) indicate they need to save 30% or more.

“Aggressive as those savings targets appear to be, they may not be based on a careful analysis of their individual circumstances,” according to Jack VanDerhei, EBRI research director, and co-author of the report. “Only 46 percent 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.”

Financial concerns weigh

Other reasons weighing on worker confidence may include more immediate financial concerns about job uncertainty and debt as well as concerns about the cost of retirement, according to the EBRI. Nevertheless, worker savings remain modest, and less than half appear to be taking the basic steps needed to prepare for retirement. Among workers providing this information in the survey, more than half (57%) report less than $25,000 in total household savings and investments (excluding the value of their primary homes and any defined benefit pension plans).

Debt may be another factor standing in the way of saving. Over half (55%) of employees and 39% of retirees report having a problem with their level of debt. “Many lack even a short-term cushion,” noted Matt Greenwald of Greenwald & Associates, which conducted and co-sponsored the survey. “Only about half of workers and a comparable number of retirees say they could definitely come up with $2,000 if an unexpected need arose within the next month.”

The survey found that retirement savings may be taking a back seat to these more immediate financial concerns. Only 2% of workers and 4% of retirees identify saving or planning for retirement as the most pressing financial issue.

Source: EBRI press release #1013, March 19, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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