Data & Research March 21, 2017

Health Expenses and Debt Are Concerns for Planning for Retirement

Forty-five percent of workers are not too or not at all confident they will have enough money for medical expenses in retirement, and nearly three in five workers say debt is a problem for them.
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Two in three workers (65%) report feeling very or somewhat confident about being able to afford basic expenses in retirement, including 26% who feel very confident, according to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey (RCS).

Workers’ confidence in their ability to afford basic expenses is higher than the confidence they report regarding their ability to pay for medical expenses in retirement. Forty-five percent of workers are not too or not at all confident they will have enough money for medical expenses in retirement. An even greater share is not too or not at all are confident in their ability to pay for long-term care expenses: nearly six in 10 (57%) do not feel confident about having enough money for long-term care in retirement.

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“Workers with a retirement plan are more likely to have confidence in paying for expenses in retirement. This is because they save more,” Stephen Blakely, editor and communications director for EBRI, said in a media call.

Retirees, who are already in that life stage, express higher levels of confidence than workers in each of these financial aspects of retirement. More than four out of five retirees (85%) feel at least somewhat confident in their ability to afford basic expenses throughout their retirement years. Three in four (77%) are very or somewhat confident about having enough money to cover medical expenses, and 55% feel very or somewhat confident in their ability to pay for long-term care.

In addition, workers are more likely to say that debt is a problem for them than retirees. Nearly three in five workers (59%) say debt is a problem for them, while 40% say debt is not a problem. In contrast, just 36% of retirees say that debt is a problem for them. Workers are twice as likely to say that debt is a major problem as retirees (18% versus 9%).

The RCS has consistently found a relationship between debt levels and retirement confidence. In 2017, just 4% of those with a major debt problem say they are very confident about having enough money to live comfortably in retirement, compared with 31% of workers who indicate debt is not a problem. On the other hand, 36% of workers with a major debt problem are not at all confident about having enough money for a financially secure retirement, compared with 8% of workers without a debt problem.

NEXT: Will Social Security and Medicare be there?

The RCS found that just 37% of workers say they are very or somewhat confident that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today, including just 6% who are very confident. One in five workers (20%) are not at all confident.

Confidence that Social Security will continue to provide benefits that are at least equal to today’s value is higher among workers ages 55 or older than among younger workers, and retirees are more likely than workers overall of any age to be confident about the future value of Social Security benefits. Half of retirees (51%) say they are confident about the future value of Social Security benefits, including 13% who are very confident.

Today’s workers are almost half as likely to expect Social Security to be a major source of income in retirement (35%) as today’s retirees are to report that Social Security is currently a major source of income (61%). However, roughly nine in 10 workers and retirees both expect/report that Social Security will be/is a source of income in retirement, whether as a major source or minor source of income.

Worker confidence in maintaining Medicare’s current level of benefits in the future is also low. Just 38% of workers say they are very or somewhat confident that the Medicare system will continue to provide benefits of at least equal value to the benefits received by retirees today, and only 5% are very confident. One in six (17%) are not at all confident in future Medicare benefits.

Like views of Social Security, worker confidence about the future value of Medicare benefits is higher among those ages 55 and older, and retirees are more likely than workers overall of any age group to be confident. Even so, just 8% of retirees say they are very confident in the value of the future benefits paid by Medicare, but 44% are somewhat confident.

The survey was conducted from January 6, 2017, to January 13, 2017, through online interviews with 1,671 individuals (1,082 workers and 589 retirees) ages 25 and older in the United States. RCS results and fact sheets may be found at https://www.ebri.org/surveys/rcs/2017/.

Data & Research March 21, 2017

Workers Could Do More to Plan for Retirement

Sixty percent of employees expressed at least some confidence in retirement, but their planning efforts and savings balances do not support this confidence level.
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Six in 10 American workers feel confident in their ability to live comfortably in retirement, though few (18%) feel very confident, according to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey (RCS).

These numbers are lower than last year, noted Stephen Blakely, editor and communications director for EBRI, in a media call. “Overall confidence is stable, but fewer are feeling really confident,” he said.

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However, just 18% of workers feel very confident that they are doing a good job preparing for retirement, and only 38% feel somewhat confident. Thirty-one percent report that they feel mentally or emotionally stressed about preparing for retirement.

Six in 10 workers (61%) in the 2017 RCS report that they or their spouse have saved money for retirement. Nearly as many (56%) report that they are currently saving for retirement. Workers who have any retirement plan are dramatically more likely than those who do not have such a plan to report they or their spouse have personally saved for retirement (80% vs. 11%), and to say they or their spouse are currently saving for retirement (74% vs. 7% among those without a plan).

One of the primary vehicles that workers use to save for retirement is an employer-sponsored retirement savings plan. Seventy-three percent of employed workers report they are offered such a plan by their current employer, and more than eight in 10 (83%) of eligible employees say they contribute money to their employer’s plan. 

The RCS has consistently found that retirement confidence continues to be strongly related to retirement plan participation, whether in a defined contribution (DC) plan, defined benefit (DB) plan, or individual retirement account (IRA). Workers reporting they or their spouse have money in a DC plan or IRA or have benefits in a DB plan from a current or previous employer are more than twice as likely as those without any of these plans to be at least somewhat confident (71% with a plan vs. 33% without a plan).

However, a sizable percentage of workers say they have no or very little money in savings and investments. Among RCS workers providing this type of information, 47% report that the total value of their household’s savings and investments, excluding the value of their primary home and any DB plans, is less than $25,000. This includes 24% who say they have less than $1,000 in savings.

Workers who have a retirement plan have significantly more in savings and investments than do those without a plan. Two-thirds of workers without a retirement plan (67%) report having less than $1,000 in savings and investments, compared with just 9% among workers with a retirement plan.

NEXT: How are workers preparing for retirement?

“Small shares of workers are taking steps to actively plan for retirement,” Lisa Greenwald of Greenwald & Associates noted in the media briefing.

Just four in 10 workers (41%) report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement. Workers reporting that they or their spouse participate in a retirement plan are significantly more likely than those who do not participate in such a plan to have tried a calculation (49% vs. 15%). “This is a key step in preparing for retirement,” Greenwald said in the media briefing.

Among those who attempted a calculation, 64% estimate that they need $500,000 or more, including 37% who believe they need $1,000,000 or more. Workers who have done a retirement savings needs calculation tend to report higher savings goals than do workers who have not done the calculation. Nearly half of workers who have done a calculation (49%), compared with 29% of those who have not, estimate they need to accumulate at least $1 million for retirement.

At the other extreme, 12% of those who have done a calculation, compared with 26% who have not, think they need to save less than $250,000 for retirement. Despite higher savings goals, workers who have done a retirement savings needs calculation are more likely to feel very confident about affording a comfortable retirement (77% at least somewhat confident vs. 52% at least somewhat confident who did not do a calculation).

Some workers, but not majorities, report they have taken other steps to prepare for retirement. These include thinking about how they would occupy their time in retirement (44%), estimating how much income they would need each month in retirement (38%), and estimating the amount of their Social Security benefit at their planned retirement age (38%). Nearly four in 10 workers (38%) have considered moving or down-sizing. 

Fewer say they have talked with a professional financial adviser about retirement planning (23%), calculated how much they would likely need for retirement health expenses (21%), or prepared a formal, written financial plan for retirement (11%).

Workers who have spoken to a financial adviser about retirement planning express greater overall confidence in their ability to afford a comfortable retirement (81% at least somewhat confident vs. 54% at least somewhat confident among those who have not spoken to an adviser).

The survey was conducted from January 6, 2017, to January 13, 2017, through online interviews with 1,671 individuals (1,082 workers and 589 retirees) ages 25 and older in the United States. RCS results and fact sheets may be found at https://www.ebri.org/surveys/rcs/2017/.

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