Confidence Rebounds for Those with Retirement Plans
WASHINGTON -- Americans’ confidence in their ability to afford a comfortable retirement has recovered slightly from the record lows of the past five years, mostly those participating in retirement plans, the Employee Benefit Research Institute found in a survey. Overall, however, actual preparations for retirement haven’t improved.
Retiree confidence increased even more, with 28% describing themselves as very confident, up from 18% in 2013, according to the Retirement Confidence Survey released by the nonpartisan institute and co-sponsored by the Principal Financial Group. In addition, 18% of workers are now very confident, up from 13% in 2013.
The increase in confidence was almost exclusively among those with higher household incomes and those participating in a retirement plan -- defined contribution, defined benefit, or an individual retirement account. The percentage of workers in a plan who described themselves are very confident rose to 24% this year from 14% in 2013 4. Only 9% of those not in a plan were very confident, a statistic essentially unchanged from 10% in 2013. Workers without a plan are four times (46%) more likely to say they are not at all confident about retirement than those with a plan (9%).
Overall reported worker savings remain low and only a minority appear to be taking the basic steps to prepare for retirement. Managing daily expenses and the cost of living are the primary reasons workers give for not saving more. Debt is a problem for 58% of workers. The exception is among those who have acted in some way to plan and save. “Our analysis shows those who are participating in a retirement plan have calculated their savings need or worked with a financial professional are not only more confident, they have less debt and higher levels of savings,” said Greg Burrows, senior vice president of retirement and investor services at The Principal. “Having a plan for both spending and saving can help manage short term needs and pave the way for more security in the future. The key is to take action.”
Those in a retirement plan were twice as likely to calculate their retirement needs, receive investment advice from a financial professional and report they retired as planned, the survey found.
Other key findings:
- 22% of workers say they need to save between 20 and 29% of their income. Another 22% indicate they need to save 30% or more. However, those without a retirement plan are more likely to set the target at 50% of income or to say they don’t know how much they need to save.
- Only 44% of workers report they and/or their spouses have tried to calculate how much money they will need to have saved for a comfortable retirement. But those workers who do tend to have higher levels of savings and confidence than those who have not.
- 65% of workers expect to work for pay in retirement but only 27% of retirees report they actually do work for pay in retirement. Nearly half say they retired earlier than planned because of issues with their health.
The Principal Financial Group is an investment management firm that offers retirement and insurance services and asset management.
Published by The Business Journal, Youngstown, Ohio.
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