Less than a quarter of baby boomers are confident they will have enough savings to last throughout their retirement years, according to new research from the Insured Retirement Institute (IRI).
This is the lowest level since IRI began this research study in 2011, when 37% of boomers had this same level of confidence. This year’s research is based on a survey of 800 Americans ages 53 to 69.
The percentage of baby boomers who are satisfied with how their lives are going from an economic perspective has also fallen – to 43%, the lowest level since 2011.
“These drops in confidence are likely directly related to a lack of planning and growing uncertainty about the future, as well as lower retirement savings and increased concern about retirement expenses,” according to the IRI report.
In a conference call on Monday with media, Cathy Weatherford, president and CEO of IRI, along with other retirement experts, discussed some factors that could be contributing to this drop in confidence among boomers.
“I think we’ve been living in a very low interest rate environment and I think that whatever you’re saving, you’re not getting what people would believe to be building the nest egg and growing it in a faster, greater way,” Weatherford said. “Secondly, I think our recession – while we’re on the upswing and on the way out of it – I think the length of it took its toll on especially boomers’ behavior and attitude. [Many] were laid off, had to retire early, had a transition in the workplace. I think boomers also had to probably take in children, we know that’s a factor.”
What IRI’s research shows is that boomers are less confident than they were five years ago about almost every aspect of retirement – not just that they will have enough savings.
Regarding health care expenses, 27% of the boomers surveyed are confident they will have enough money to cover these expenses in retirement, compared with 37% in 2012. The percentage of boomers that are confident they will be able to pay for long-term care is also down – from 24% in 2012 to just 16% today, according to IRI’s research.
“As you get older, we know that health care expenses and the cost of meds become a factor because that’s when you start finally experiencing some health issues,” Weatherford said during the conference call.
Only 22% of the boomers surveyed believe they are doing a good job preparing financially for retirement, down from 41% in 2012.
Brent Neiser, senior director of strategic programs and alliances at National Endowment for Financial Education, attributes some of this drop in confidence to an increase in complex financial decisions. “What do I work on first? College funds, retirement, health care, [health savings account], all these selective choices of individual actions,” Neiser said during the conference call. “Even though there’s some automation [such as auto-enrollment, automatic investment selection and auto-escalation], they even need to be adjusted from time to time. I think confidence may drop a little bit, based on confusion and ‘How do I sort through these decisions?’”
Boomers’ lack of confidence is understandable, given what the research finds regarding boomers’ readiness for retirement.
Only 55% of the boomers surveyed reported having savings for retirement, the study finds. And, according to IRI, 42% of those boomers with savings have saved less than $100,000 – an amount that would generate less than $7,000 a year in retirement income.
IRI asked these boomers that lack confidence in their retirement plans what they would have done differently; 68% said they would have saved more and 67% said they would have started saving earlier.
Significantly more boomers than last year (27% compared to 17%) also recognized that they should have maximized the value of their employer-provided retirement benefits, to the extent such benefits were available.
In addition to not having savings for retirement, only 39% of the boomers surveyed have tried to determine how much they need saved to be able to retire, and only 27% have sought assistance from a financial professional.
— Check out 4 Trends That Will Shake Up Workplace Retirement Plans on ThinkAdvisor.