Americans’ confidence in their ability to afford a comfortable retirement has recovered somewhat from the record lows of the past five years, but it does not appear to be founded on improved retirement preparations, and it may be limited to those with retirement plans.
The 24th annual Retirement Confidence Survey (RCS)—conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates—finds that the percentage of workers confident about having enough money for a comfortable retirement, at record lows between 2009 and 2013, increased in 2014. Eighteen percent are now very confident (up from 13% in 2013), while 37% are somewhat confident. Twenty-four percent are not at all confident (statistically unchanged from 28% in 2013).
However, in the aggregate, reported worker savings remain low, and only a minority appear to be taking basic steps to prepare for retirement. This increased confidence is observed almost exclusively among those with higher household income, but confidence was also found to be strongly correlated with household participation in a retirement plan. Nearly half of workers without a retirement plan were not at all confident about their financial security in retirement, compared with only about one in 10 with a plan.
“Retirement confidence is strongly related to retirement plan participation,” notes Jack VanDerhei, EBRI research director and co-author of the report. “In fact, workers reporting they or their spouse have money in a defined contribution plan or IRA or have a defined benefit plan from a current or previous employer are more than twice as likely as those without any of these plans to be very confident—24% with a plan versus 9% without a plan.”
The increase in confidence between 2013 and 2014 occurred primarily among those with a plan (an increase from 14% very confident in 2013 to 24% in 2014 for those with a plan, compared with level readings among those without a plan (10% very confident in 2013 and 9% in 2014). He explains that a possible reason for improved confidence is the rising stock market and property values.
Retiree confidence in having a financially secure retirement, which historically tends to exceed worker confidence levels, has also increased, with 28% very confident (up from 18% in 2013) and 17% not at all confident (statistically unchanged from 14% in 2013).
Sixty-four percent of workers report they or their spouse have saved for retirement (statistically equivalent to 66% in 2013), although nearly eight in 10 (79%) of full-time workers say that they or their spouse have done so. Here again, participation in a retirement plan mattered: 90% of workers participating in a retirement plan had saved for retirement, compared with just one in five of those without a retirement plan.
Cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 53% of workers citing these factors. Existing debt is clearly an obstacle standing in the way of many needing to save for retirement and weighing on retirement confidence, according to Matt Greenwald, of Greenwald & Associates.
“Just 3% of workers who describe their debt as a major problem say they are very confident about having enough money to live comfortably throughout retirement, compared with 29% of workers who indicate debt is not a problem,” he noted. “Fifty-eight percent of workers and 44% of retirees say they are having a problem with their level of debt.”
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