Chances are, you’re more confident about your prospects for a comfortable retirement today than you were between 2009 and 2013, when retirement confidence was in the doldrums.
According to the recently released Retirement Confidence Survey, published annually by the Employee Benefit Research Institute (EBRI), the percentage of workers very confident about having enough money for a comfortable retirement increased from 13 percent in 2013 to 22 percent in 2015, and leveled off at 21 percent in 2016.
Confidence among retirees was even stronger than their working counterparts. Those who felt very confident that they had enough money for a comfortable retirement stood at 39 percent in 2016, more than double the confidence level of 2013, when it was only 18 percent.
While there are bright spots in the EBRI survey, a deeper dive shows that many retirees (12 percent) indicated that they were not at all confident in their ability to live a comfortable retirement. Among workers, those who were not at all confident stood at 19 percent in 2016. This is an encouraging drop from the 24 percent in 2015, but it still shows that many Americans feel extremely unprepared for retirement. Savings amounts would seem to confirm this: More than half of survey respondents (54 percent) report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit (DB) plans, is less than $25,000. This includes 26 percent who indicated they have less than $1,000 in savings.
On the encouraging side:
Worker confidence in the affordability of various aspects of retirement continued its increase in 2016. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses increased to 43 percent in 2016, up significantly from 25 percent in 2013, and a healthy bump up from 2015’s 37 percent.
The percentages of workers who are very confident in their ability to pay for medical expenses also increased, going from 14 percent in 2013 to 22 percent in the most recent survey.
When it comes to the actual task of saving for retirement, 69 percent of workers report they or their spouses have saved for retirement (statistically equivalent to 67 percent in 2015). But an alarming percentage of workers report they have virtually no savings and investments. The EBRI survey finds that among workers providing this type of information, 26 percent say they have less than $1,000 saved.
A key factor in saving appears to be participation in some sort of retirement plan such as a pension, 401(k) plan or an IRA. Not having such plans makes it far more likely that a survey respondent would report this low level of savings (67 percent vs. 9 percent) and far less likely to report having saved at least $100,000 (5 percent vs. 34 percent).
Not a saver by nature? FINRA suggests starting with an emergency fund, which in addition to helping you stay on sound day-to-day financial footing, can teach you a lot about automating your savings, a key aspect of saving for retirement. If you don’t have a retirement plan at work, opening an IRA or MyRA are likely good options.
Retirement Preparations Lacking
While recognizing that many confidence indicators have increased in the 2016 survey, EBRI authors note that “only a minority of all workers appear to be taking basic steps needed to prepare for retirement.” For example, EBRI notes in an accompanying Fact Sheet on Retirement Preparations that three-quarters of workers are confident about their ability to do a good job planning for retirement. Yet only 48 percent report they have ever tried to calculate how much to save in order to live comfortably in retirement. Indeed, more than a third of all workers (39 percent) simply guess at how much they will need to accumulate.
A good first step when it comes to getting a handle on retirement savings is to use a retirement calculator to estimate how much money you may need to get you through your retirement years. The exercise will either reassure you about your ability to retire comfortably—or give you a clearer picture of what you need to do to catch up.
Source: US Official News