Americans’ Preparations for Retirement Continue to Erode

Americans’ Preparations for Retirement Continue to Erode


WorldatWork

Newsline *

Americans’ Preparations for Retirement Continue to Erode ***

March 10, 2010 — As the economy begins to recover Americans are becoming more confident in their ability to retire; however, their self-described preparations for retirement continue to erode, according to a recent survey. *

The Employee Benefit Research Institute (EBRI) and Mathew Greenwald and Associates released their 2010 Retirement Confident Survey (RCS), which found a growing number of American workers are also planning to delay retirement, which has a negative impact on the U.S. job market. The survey also found that Americans continue to lack confidence in institutions. They are most likely to express confidence in private employers and least likely to express confidence in the federal government. Both workers and retirees expressing low levels of confidence in banks and insurance companies. *

“Americans’ attitudes toward retirement have clearly tracked the economy the last couple of years, and that seems to be the case in 2010,” said Jack VanDerhei, EBRI research director and co-author of the survey. “Unfortunately, while their attitudes are stabilizing, their preparation for retirement is not. A distressing number of people have no savings at all.” *

Among the survey’s key points: *

- Stabilizing confidence *** : The percentage of workers very confident about having enough money for a comfortable retirement remains steady at 16%, which is statistically equivalent to the 20-year low of 13% measured in 2009. Retiree confidence about having a financially secure retirement has also stabilized, with 19% saying now they are very confident (statistically equivalent to the 20% measured in 2009). *

- Basic expenses *** : Worker confidence about paying for basic expenses in retirement has rebounded slightly, with 29% now saying they are very confident about having enough money to pay for basic expenses during retirement (up from 25% in 2009, but still down from 34% in 2008). The percentage of retirees indicating they are very confident about paying for basic expenses has stayed level at 33% (statistically equivalent to the 34% observed in 2009). *

- Financial aspects of retirement ***: The percentages of workers very confident about other financial aspects of retirement have held steady at 12% for medical expenses, 10% for long-term care expenses, and 21% for doing a good job of preparing for retirement. However, the percentages not confident continue to creep upward, from 44% in 2009 to 51% in 2010 for medical expenses, from 56% to 61% for long-term care expenses, and from 30% to 35% for doing a good job of preparing for retirement. *

- Fewer are saving ***: Fewer workers report that they and/or their spouse have saved for retirement (69%, down from 75% in 2009 but statistically equivalent to 72% in 2008). Moreover, fewer workers say that they and/or their spouse are currently saving for retirement (60%, down from 65% in 2009 but statistically equivalent to percentages measured in other years). *

- Ranks of those with no savings are growing *** : An increased percentage of workers report they have virtually no savings and investments. Among RCS workers providing this type of information, 27% say they have less than $1,000 in savings (up from 20% in 2009). In total, more than half of workers (54%) report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000. *

- Workers postponing retirement *** : One-quarter of workers (24%) report they have postponed their planned retirement age in the past year. Among the reasons cited for delaying retirement are the poor economy (29% of those postponing retirement), a change in their employment situation (22%), inadequate finances (16%), and the need to make up for losses in the stock market (12%). *

- Later retirement expected ***: Although the age at which workers report they expect to retire shows little change from 2009, a longer-term look finds significant change. In particular, the percentage of workers who expect to retire after age 65 has increased over time, from 11% in 1991 to 14% in 1995, 19% in 2000, 24% in 2005, and 33% in 2010. *

- Institutional confidence ***: Americans continue to lack confidence in institutions. They are most likely to express confidence in private employers (23% of workers and 27% of retirees very confident) and least likely to feel confidence in the federal government (11% of workers and 8% of retirees). Just 19% of workers and 22% of retirees report they are very confident about banks, while 12% of workers and 13% of retirees say they are very confident about insurance companies. Moreover, the percentages of retirees somewhat confident about banks (45%, down from 51% in 2009), insurance companies (42%, down from 56%), and the federal government (30%, down from 45%) are declining. *

- Clueless about savings goals ***: Many workers continue to be unaware of how much they need to save for retirement. Less than half of workers (46%) report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement. *

- Some reality testing on savings needs *** : The savings goals cited by workers who have done a retirement needs calculation have increased over time. In the 2000 RCS, 31% said they needed to accumulate at least $500,000 for retirement. This percentage gradually increased to 43% in 2005 and 54% in 2010. *

- Investing confidence ticks up ***: Those who have saved for retirement have recovered some confidence in their ability to invest their savings wisely. Thirty-two percent of workers indicate they are very confident (up from 24% in 2009) and another 54% are somewhat confident. Retirees who have saved for retirement show a similar rebound in confidence that they are investing their savings wisely, with 82% saying they are very or somewhat confident (up from 70% in 2009). *

- Sources of retirement income ***: Over time, the RCS has observed changes in workers’ expected sources of retirement income. In particular: fewer workers are expecting to receive retirement income from Social Security (77%, down from 88% in 1991) and defined benefit plans (56%, down from 62% in 2005). However, more workers report they will rely on employer-sponsored retirement savings plans (75% in 2010, up from 69% in 2005) and employment income (77%, up from 70% in 2005). *

- Guaranteed income products*** : Few workers report they are likely to purchase a financial product or select a retirement plan option that pays them guaranteed income each month for the rest of their life. Only 11% indicate they are very likely to do so, while 35% say they are somewhat likely. Only 14% of retirees report they purchased a guaranteed-income product or selected a guaranteed-income option from a retirement plan. *

Survey methodology ***These findings are part of the 20th annual Retirement Confidence Survey (RCS), a survey that gauges the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The survey was conducted in January 2010 through 20-minute telephone interviews with 1,153 individuals (902 workers and 251 retirees) age 25 and older in the United States. Random digit dialing was used to obtain a representative cross section of the U.S. population. To further increase representation, a cell phone supplement was added to the sample. *

In theory, the weighted sample of 1,153 yields a statistical precision of plus or minus 3 percentage points (with 95% certainty) of what the results would be if all Americans age 25 and older were surveyed with complete accuracy. There are other possible sources of error in all surveys, however, that may be more serious than theoretical calculations of sampling error. These include refusals to be interviewed and other forms of nonresponse, the effects of question wording and question order, and screening. While attempts are made to minimize these factors, it is impossible to quantify the errors that may result from them. *

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http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.