Retirement Confidence Is Up

The 2015 Retirement Confidence Survey: The Importance of Having a Retirement Plan. It is by the non-profit Employee Benefit Research Institute (EBRI) http://www.ebri.org/pdf/PR1121.RCS.21Apr15.pdf. It came out today. The overall results are that Retirement Confidence is up for those with a plan. But it came with the added EBRI comment that there is little sign people are taking the necessary steps to achieve that goal.

So it’s more or less a false confidence. Coming off of the retirement confidence lows of 2009 through 2013 the increase in people’s retirement optimism centers around those who claim that they and/or their spouse has a retirement plan. Such as a defined contribution (401(k)-type) plan, defined benefit (pension) plan, or individual retirement account (IRA).

Other findings:

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.

Workers are somewhat more confident that they are doing a good job of preparing financially for retirement:

Overall, about two-thirds are somewhat or very confident about their financial preparations, while one-third indicates they are not confident.

Workers without a retirement plan have low or no savings and only a minority appears to be taking any of the basic steps needed to prepare for their eventual retirement:

Only 23 percent of those without a retirement plan have done their retirement needs calculation and 64 percent of those without a retirement plan say they have saved less than $1,000.

Working Longer:

Working Longer most likely due to recognizing their inadequate retirement preparations:

16 percent of workers in the 2015 Retirement Confidence Survey report the age at which they expect to retire has changed either up or down in the past year. Of those, 81 percent report that their expected retirement age has increased. However the survey results indicate that many retirees ended up leaving the workforce earlier than they expected because of reasons outside their control.

Working people understand that they may need to work longer to close their funding gap:

Working longer to financially secure their retirement. But the reality is that many cannot due to illness, disability, having to care for someone else, or job loss/change. The truth is that having to rely on working longer “is not a solid strategy for retirement preparedness.”

The Take Away:

What most of the coverage of this report focuses on is the sad fact that too many have small savings:

A third of workers have less than $1000 saved for retirement and 57% told the organization they have less than $25,000 saved for retirement, excluding their house and any defined pensions that they may or may not have.

The top two reasons survey respondents cited for not saving more:

Cost of living and day-to-day expenses. Debt was also an issue reported with 51% of current workers and 31% of retirees saying their payments are too high for their mortgage, credit card, and car loans. Interestingly the percentage of people reporting debt problems has dropped since last year so it seems that tackling the debt-problem message appears to be more successful reaching people than any retirement saving message.

No Idea What They Need to Retire

A big problem found is that 52 percent (over half) of workers age 45 and older haven’t even tried to figure out the amount of money needed to meet their retirement goals.

Having some kind of workplace retirement plan was key:

Key in having higher retirement confidence and having some savings started but in many cases not enough is being saved. People admit they could easily find a way to increase savings at least $25 a week but don’t do it.

Study’s Conclusion:

It is good that Retirement Confidence is up for those with a plan. But there is still a huge financial disconnect with far too many workers. The survey results are fairly obvious when it comes to success being tied to having a workplace retirement plan. It’s far easier to save when it comes out of your paycheck before you get it.

I would have liked to have seen details not just by percent of workers but also by salary ranges. Then perhaps we could understand if the majority of low or no retirement savings percentages were concentrated in the low wage earner ranges. Or see what percent was due to financial irresponsibility.

Retirement Confidence is upRetirement Confidence is up and It all comes down to the simple basics:

 

  • Live financially responsibly and set, track, tweak, and know your budget.
  • Save as early as you can and as much as you can.
  • Pay off and avoid debt for stupid crap you really don’t need.
  • Calculate your lifestyle costs for retirement and set your goals.
  • Saying you will just work forever or longer is a head-in-the-sand avoidance and most likely doomed strategy.

I know some people who have ZERO set aside for retirement. They do have nice cars and a big house and I wonder how they would have answered to the retirement confidence survey. How confident are you in your retirement savings and your plan’s goals?