Most Americans are very or somewhat confident about having enough money to live comfortably throughout their career, or at least they were before the rise of the coronavirus pandemic, found the 2020 Retirement Confidence Survey by the Employee Benefit Research Institute and Greenwald & Associates.
A subsequent survey done at the end of March showed some erosion of confidence, especially for those workers who had lost jobs due to the pandemic, which might be a harbinger of things to come.
Although the 2020 January survey found 69% of workers very or somewhat confident of financial security in retirement, that number dropped to 63% in late March. For those already retired, the pandemic didn’t seem to matter, as the very or somewhat confidence level was down slightly to 76% in March from 77% in late January. However, in 2019, that number for retirees was 82%.
The group also surveyed workers and retirees on other aspects of retirement, finding differences between January and March.
- In January, 75% of workers were very or somewhat confident of having enough money to cover basic expenses in retirement. But in March, that number dropped to 69%, of which the very confident workers dropped to 24% from 33%.
- Asked the same question in January, 81% of retirees were very or somewhat confident they would have enough money to cover basic expenses in retirement, which actually rose to 85% in March, the same amount as the previous year.
- Medical expenses were more of a question. For workers, 64% were confident they would have enough money to cover medical expenses in retirement, which dropped to 60% in March. Of those, very confident respondents dropped from 22% in January to 17% in March.
- Of retirees, in January, 70% believed they would have enough money for future medical expenses, a number that increased in March to 74%.
- Sixty-three percent of workers were very or somewhat confident they would have enough money to last the rest of their life, a number that fell to 57% in March.
- Retirees were more confident, with 27% very confident and 41% somewhat confident they would have enough money to cover their lifetime, a number that rose from 68% to 74% in March.
- Long-term care, such as nursing home or home care was more worrisome for workers, who were only 18% very and 36% somewhat confident they would have enough money to cover it. That amount dropped to 50% in March from 54% in January.
- Retirees experienced no drop in same in confidence level from January to March. In January 52% were very (15%) or somewhat (37%) confident of having enough money to cover long-term care.
Other findings included 67% workers very or somewhat confident in their preparations for retirement, a number that dropped to 64% in March.
Both workers and retirees were confident that Medicare benefits would continue at the same level. In January, 50%, up from 45% in 2019, of workers were very or somewhat confident, and that rose to 54% in March, while 66% of retirees (down from 72% in 2019 but up from 46% in 2018) were very or somewhat confident about Medicare, which actually rose to 71% in March.
And Social Security? In January, less than half or 48% of workers (vs. 68% of retirees) were very or somewhat confident that Social Security will continue to provide benefits at least equal in value to the benefits received by retirees today, which increased to 51% in March.
The study also looked at what workers thought of their workplace retirement plans, and 83% of them (down to 76% in March) were overall very or somewhat content with their company plans as well as the options available.
In January, factors workers looked at most when selecting options were: performance growth (43%), risk tolerance (37%), fees (29% — which jumped to 36% in March), and easy investments that adjust, such as target date funds (21%).
The study also found that eight in 10 workers had a retirement plan and were more likely to have a total savings and investments of $100,000 or more (56% with a plan, 7% without). In addition, four in 10 workers believe they will need $1 million or more for retirement. More than half of the workers believed guaranteed income products, such as annuities, will be a source of income in retirement.
The researchers noted in the report that “the stability in retirement confidence is surprising to see given the current health and economic crisis impacting Americans.” Their conclusion is that “workers’ continued confidence is likely reflecting Americans’ view that current conditions will pass before they jeopardize long-term financial security in retirement.”
That said, with the rise of unemployment during the coronavirus crisis, those who have lost jobs or have “negative employment status” is less rosy. For example, while 67% of workers were very or somewhat confident they would live comfortably in retirement, that dropped to 47% of those who had lost jobs. In fact, confidence scores in almost every category, from medical expenses to trusting Social Security will continue to provide benefits, were down between 17% and 28% for those with a negative employment change.
The January online survey was conducted of 1,018 workers and 1,024 retirees. The supplemental March survey was of 505 workers and 499 retirees ages 25 or older.
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