American workers and retirees are expressing higher confidence about their ability to afford retirement this year, even though there is little sign they are taking the necessary steps to achieve that goal.
The 25th annual Retirement Confidence Survey (RCS)—conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates—finds the increasing optimism is a result of those who indicate they and/or their spouse have a retirement plan.
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“Those without a retirement plan seem to understand they are likely to have difficulties accumulating adequate financial resources for retirement: 44% of workers without a retirement plan are not at all confident about having enough money for a comfortable retirement, compared with only 14% of those who have a plan,” says Jack VanDerhei, EBRI research director and co-author of the report.
The percentage of workers confident about having enough money for a comfortable retirement—at record lows between 2009 and 2013—increased in 2014 and again in 2015.
Twenty-two percent are now very confident (up from 13% in 2013 and 18% in 2014), while 36% are somewhat confident. Overall, 24% are not at all confident (statistically unchanged from 28% in 2013 and 24% in 2014).
However, this increased confidence is based on those indicating they and/or their spouse have a retirement plan. Worker confidence in the affordability of various aspects of retirement has also rebounded. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses has increased (37%, up from 25% in 2013 and 29% in 2014).
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The percentages of workers who are very confident in their ability to pay for medical expenses (18%, up from 12% in 2011) and long-term care expenses (14%, up from 9% in 2011) are slowly inching upward.
Confidence among retirees (which historically tends to exceed worker confidence levels) also increased in having a financially secure retirement, with 37% very confident (up from 18% in 2013 and 27% in 2014). The percentage not at all confident was 14% (statistically unchanged from 14% in 2013 and 17% in 2014).
Workers are somewhat more confident that they are doing a good job of preparing financially for retirement: 25% are very confident in 2015 (up from 17% in 2013). Overall, about two-thirds are somewhat or very confident about their financial preparations, while 32% indicate they are not confident.
However, for workers without a retirement plan, savings remain low and only a minority appears to be taking basic steps needed to prepare for retirement. Only 23% of those without a retirement plan have done retirement needs calculation and 64% without a retirement plan say they have saved less than US$1,000.
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Perhaps in recognition of the fact that their financial preparations for retirement may be inadequate, 16% of workers in the 2015 RCS say the age at which they expect to retire has changed in the past year. Of those, the large majority (81%) report that their expected retirement age has increased. But the RCS also finds that many retirees say they left the workforce earlier than planned for reasons beyond their control.
“Workers still expect to work longer to make up for any savings short falls. However, many retirees continue to report that they retired before they expected to due to an illness or disability, needing to care for others, or because of a change at their job,” states Craig Copeland, senior research associate at EBRI and co-author of the study. “Consequently, relying on working longer is not a solid strategy for retirement preparedness.”
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