April 28, 2011 at 4:57 pm EDT | by David M. Taube
Retirement confidence hits new low

Facing the realities of economic conditions, American workers’ confidence in being able to afford a comfortable retirement slid to its lowest level since the Retirement Confidence Survey began 20 years ago. More than a quarter (27 percent) of workers said they are “not at all confident” about retirement, up 5 percent from a year ago. Results of the 2011 RCS released in March reveal that the economy, unemployment, government fiscal crises, investment returns, and health care costs are creating a “New Normal” in which retirees are delaying retirement.

Meanwhile, confidence and saving habits continue to be better among those who have prepared a retirement needs calculation. Further, confidence, likelihood of having saved, and total savings and investments all increase with higher household income and education, and good health status. Other important factors include participation in employer-sponsored retirement plans and debt level.

Highlights of the survey, conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates through random telephone interviews with 1,258 individuals, include the following about workers and retirees:

Consistent with the record lack of confidence, the percentage of workers “very confident” about having enough money for a “comfortable retirement” sank to a low of 13 percent, down from 16 percent in 2010 and equal to 2009. This measure has tumbled from 27 percent in 2007 with the financial markets turmoil in 2008 and ensuing economic malaise.

Nearly a quarter (24 percent) of retirees reported that they are “very confident” in having a “financially secure” retirement, statistically equal to the 19 percent tallied in 2010. The proportion of “somewhat confident” retirees dropped to 36 percent from 41, while retirees “not too confident” and “not at all confident” was essentially unchanged at 38 percent versus 39.

Planning by Workers: With only 42 percent of workers saying that they and/or their spouse have tried to calculate how much of a nest egg they will need for a comfortable retirement, a majority remains unaware of how much they need to save for retirement. Although this measure has remained relatively stable since 2003, ranging from 43 to 47 percent, it retreated from 46 percent in 2010.

Planning by Retirees: Nearly seven in 10 retirees (69 percent) indicate they did some type of financial planning for retirement, with 43 percent of these retirees saying they began to plan 20 years or more before they retired. Another 23 percent report beginning to plan between 10 and 19 years before retirement. However, 13 percent started planning five to nine years before retirement and 16 percent started less than five years before retirement.

Instead of doing a systematic retirement needs calculation, 42 percent of workers “guessed” how much they will need to accumulate.  Only 11 percent of those who report having done a calculation guess how much they will need to accumulate, while 65 percent who have not done a calculation guess. An equal number (21 percent) each report asking a financial adviser and doing their own estimate, while 9 percent read or hear how much is needed, 7 percent use an online calculator, and 5 percent base their estimate on their current expenses or lifestyle or fill out a worksheet or form.

Savings and investments are minimal for many: more than one-half (56 percent) of all workers reported total savings and investments (not including value of primary residence or defined benefit pension plans) of less than $25,000. Further, 29 percent of workers said they have less than $1,000 in savings, up from 27 percent last year and 20 percent in 2009.  Only 24 percent indicated savings and investments of more than $100,000, of which 10 percent had accumulated $250,000 or more.

Economic factors continue to influence when workers will retire, with 20 percent expecting to postpone their retirement age.

A retirement savings calculation is a very effective tool for changing retirement planning behavior, with 44 percent of workers who calculated a goal amount reported having made changes to their retirement planning as a result. Boost your retirement confidence by calculating how much of a future nest egg you will need for a comfortable retirement.

(This article is for informational purposes only and is not financial, legal, or tax advice. Please consult with your adviser before making any decisions.)

  • OMFG, I can hardly believe I’m in line to retire in 10 year. I was so lucky to have taken that low-paying government job that no one else wanted at age 45 — after a small inheritance allowed me to bid “adieu’ to my hi-paying but much-hated career in private industry. Now, all of a sudden, 10 years have flown by, and with a little job-jumping within the federal system, that low salary has more than quadrupled and I am halfway to retirement! Fortunately, at the beginning of my federal career, I wisely maxed out my retirement contributions instead of opting to buy more “stuff”. Also, by eschewing other senseless purchases, I have nearly paid off my home (a must for retirement!) by making so many extra payments on my 30 year mortgage that I collapsed it to only 21 years. I can hardly believe that the house I purchased in a somewhat ‘iffy’ area of Capitol Hill (where few wanted to buy) has astronimically grown in value to an unimaginable sum and I will use the the sales price to buy an annuity that will complement my small gov’t pension for 30+ years (if I live so long) . All told, it’ll be about an $80K in retirement income annually.

    The secret? I sacrificed and opted to retire my mortgage debt early and to contribute heavily towards my retirement.

    Don’t hate me because I was dutiful :-)

  • Rico,

    Good luck…..hyperinflation will eat every penny of your retirement. I can’t wait until BabyBoomer +’s get what they deserve. Have fun eating cat food in your retirement.

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