American workers are less confident about their prospects of retiring comfortably, according to the Ninth Annual Transamerica Retirement Survey.
Focused on retirement-related attitudes and behaviours of the American workforce, the study found that the current credit crisis, volatile market conditions, and economic uncertainty are negatively affecting the way workers are prioritizing their retirement savings.
According to the study, 59% of full-time workers polled displayed confidence in a comfortable retirement, down from 75% in the previous year. Sixty percent believe they could work until age 65 and still not have enough money to retire, up from 48%. And fewer than half (48%) said they are building a large enough retirement fund, down from 65%.
“In past years, our annual retirement study has found that people often face competing financial priorities that prevent them from saving more for retirement, but the economic climate this year is noticeably worse,” says Catherine Collinson, market and trends expert for the Transamerica Center for Retirement Studies. “A loss of confidence during economic uncertainty is often expected, but it is troubling that so many people may feel the need to put their long-term retirement security on the back burner in favor of the current malaise.”
The number of workers who list debt payment as their greatest financial priority has jumped to 32% from 18%. Those who listed “just getting by” as the top priority remained almost the same at 17%.
When asked to identify one factor preventing them from saving more for retirement, the number of respondents who claimed “too much debt—need to pay it off” jumped to 25% from 16% last year. Seventy percent indicated excessive credit card debt, a massive increase from 48% last year. The most frequent response “already stretched—need to cover basic living expenses,” remains steady.
The study reveals that the uncertainty is also affecting people’s existing retirement savings. Eighteen percent of respondents admitted to taking out a loan from their retirement plans, up from 11% last year. Forty-nine percent of those cited debt repayment as the reason, up from 27% in 2006.
Despite the negative findings, the survey revealed that overall retirement plan participation rates are high, contribution rates haven’t changed, and few have decreased or stopped their contributions.
“The fact that people are continuing to participate and contribute to their company-sponsored retirement plans is encouraging news—especially given that nearly half of the survey respondents indicated that they plan on relying on their 401(k), 403(b), and IRAs as their primary source of income when they retire,” says Collinson. “Now more than ever, Americans must stay focused on achieving future retirement security while balancing their short-term needs.”
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