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Retirement Confidence at Lowest Point in Two Decades

Solution seems to be to work longer

The signs of improvement in the U.S. economy haven't made Americans feel any more secure about how they will pay for their retirement.

In fact, the 2011 Retirement Confidence Survey says that confidence levels are the most pessimistic that the RCS has ever measured in more than two decades of conducting the survey.

According to the report, released March 15 by the Employee Benefit Research Institute, 27 percent of workers are "not at all" confident about having a comfortable retirement, up from 22 percent in 2010.

And when those who are "not too" confident are added to the mix, a total of half of workers are worried about their financial future.

Despite the numbers, EBRI Research Director Jack VanDerhei finds the results "positive."

"They show that people may be starting to realize the level of savings they will realistically need for a comfortable retirement," he said at a press conference.

Workers not facing reality

But while American workers may be coming to grips with reality for the first time, the report indicates they have yet to take the actions necessary to remedy the situation.

Workers know they should be saving for retirement, but just over half (59 percent) are actually doing something about it, down from 65 percent in 2009.

What's more worrisome is that many workers do not have a clear idea of what they will need. In 2000, 53 percent said they made an effort to calculate their savings goal; in 2011, only 42 percent had done so.

"They aren't even trying," says Matthew Greenwald, president of Greenwald & Associates, which conducted the survey.

When asked directly for estimates of how much they needed to save, the responses were inadequate when compared with figures submitted by financial experts. Thirty-one percent of Americans think they need to save less than $250,000 for what may be a 30-year retirement. More than a third (42 percent) said they determined their retirement needs by guessing.

Key message: plan ahead

"A key message to take away from this is the importance of completing a self-assessment using a retirement calculator," says Jean C. Setzfand, director of financial security for AARP. A self-assessment may be daunting, she says, and putting money away is even more difficult.

The report indicates that for many people, the solution will be to work longer: 20 percent of workers say they now intend to retire later, and 74 percent report they plan to work in retirement (up from 70 percent in 2010).

An almost equal number of workers (87 percent) and retirees (84 percent) are afraid Social Security payments will be reduced. "People are more concerned about Social Security because they see that they need it," says Setzfand. "I think that's what may be driving the pessimism in part."

Other findings include:

Among workers reporting savings or investments, 29 percent said they have less than $1,000. More than half said the total of their household savings and investments, not including their home, is less that $25,000.

One third of all respondents — both workers and retirees — said they had to tap or take a loan from an IRA, 401(k), savings or investment account to pay for basic expenses last year.

Sixty-two percent of workers realized they could save $25 a week just by forgoing dinner out or a movie. "But they don't see the trade-off between giving up something now and security later," Greenwald says.

Workers are evenly split about being confident of having enough money to take care of medical expenses in retirement (48 percent "very" or "somewhat confident" vs. 50 percent "not too" or "not at all confident"). Retirees are much more optimistic on this score (68 percent "confident" vs. 30 percent "not confident").

The annual RCS is a random, nationally representative survey of 1,000 individuals age 25 and older, and is funded by 25 organizations including AARP.

Cathie Gandel writes on business and the economy.

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