A comfortable retirement is still something many Americans fear they’ll have to do without, according to EBRI’s 2013 Retirement Confidence Survey. The research, released Tuesday, found that 21% of workers are “not too confident” they will have enough money to retire and 28% say they’re “not at all confident.”
EBRI noted that the percentage of people who are not at all confident in their ability to retire is at the highest level it’s been in the 23 years the organization has been conducting the survey.
Confidence levels have remained steadily low since the 2011 survey, despite an improved economy over all. The survey suggested that may be because respondents are just catching on to how far from their goals they really are.
Jack VanDerhei, EBRI research director and co-author of the report, also noted that savings targets are likely just guesses rather than the result of careful analysis. “Only 46% 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,” he said in a statement.
“The survey provides insight on the reason behind crucial decisions Americans aren’t making,” Matt Greenwald, president of Mathew Greenwald & Associates, which conducted the survey for EBRI, said during a media briefing on the survey. “Savings rates of workers are disturbingly low, and many are not saving at all. As a result, the accumulated savings are quite low. Even when we look at workers 45 and over, just under half, 47%, have less than $25,000. Clearly many are way behind in their preparation for retirement.”
While some economic indicators have improved, it hasn’t necessarily impacted workers in a substantial way. The survey found respondents are still struggling with short-term financial issues like job uncertainty and debt. About 60% of workers and 39% of retirees say they have a problem with their level of debt, while a quarter of workers and 15% of retirees say their debt has increased over the last five years.
Eighty-two percent of workers eligible to participate in an employer-sponsored retirement plan do so, the report found, and an additional 8% have some savings in a workplace plan but aren’t currently contributing to it.
When asked why they aren’t saving, Greenwald said, “the answer they give is quite clear: cost of living and day-to-day expenses.”
Indeed, among the issues taking precedence over saving are simply getting by day to day, paying for health insurance or medical care, taxes and mortgage payments. In the face of those immediate concerns, saving for retirement was rated as the most pressing financial concern facing Americans by just 2% of workers and 4% of retirees.
“People who have a [plan through their employer] have a very easy way to save through payroll deduction and have tax incentives to do so,” Greenwald said. The report found that among those who don’t have access to a plan, if they were offered one and automatically enrolled, most would leave the deferral rate as is, whether it were set at 3% or 6%. Less than a quarter said they would decrease the 6% contribution.
“A lot of people understand deep down that they should be saving more and appreciate the automatic enrollment,” Greenwald said. “Nonetheless, some employers overestimate how many people will be upset” about the rate at which they are defaulted in, although most with a higher rate probably haven’t really seen a “revolution.”
With retirement rated as such a low priority, it’s not surprising to find that saving rates have declined since 2009. In 2009, 75% of workers said they or their spouse had saved for retirement, up from 66% in 2007; however, that level has slowly returned to 66%, the lowest levels since the survey began collecting data on respondents and their spouses.
Confidence in the ability to pay for medical expenses is low, but even basic expenses appear to be a hurdle some respondents don’t think they’ll be able to overcome. More than half of workers reported low levels of confidence in their ability to pay for medical care in retirement, and 29% said they were not too confident or not at all confident that they could pay for basic expenses. Long-term care is clearly a big concern for workers. Thirty-nine percent said they were not at all confident they could cover the cost of long-term care after they stopped working, and 23% said they were not too confident.
Workers are unlikely to ask for help they clearly need. EBRI found just 23% of workers and 28% of retirees have gone to a financial advisor for professional help. Of those, just over a quarter actually followed all the advice they received. Most reported they ignored at least part of the advice their advisor gave them.
Even though many respondents use professional advice selectively, Vanderhei said that people who look for more information, whether through an advisor or online tools, tend to have more appropriate savings rates. “Overall, those who do use these additional sources of information end up actually having much more realistic targets,” he said during the media briefing.
EBRI identified a number of expectations workers have about retirement. “The most significant trend in the 23-year history of the survey is the plan to work longer,” Greenwald said. The report found 22% of workers expect to postpone retirement, and since 1991, the percentage of workers who expect to retire after 65 has steadily increased from 11% to 36%.
The actual retirement age, however, has changed more slowly. Fourteen percent of retirees in 2013 said they retired after age 65, up from 8% in 1991.
“The second expectation is the plan to continue to work after retirement,” Greenwald said. “In some ways this is realistic—if you don’t save enough, you must work longer—but it can be risky if people use the expectation of longer work to justify not saving now.”
One of the dangers in planning to work longer or to work after they leave their primary career is that workers may find they simply aren’t able to continue working. “Almost half of retirees said they had to retire before they expected for reasons beyond their control,” Greenwald said. Those reasons include not just workers’ health (55%), but downsizing or closures at work (20%) and caregiving duties for other family members (23%). Just 7% of retirees gave a positive reason for retiring early.