Workers are, perhaps understandably, less confident about their retirement prospects—but one-in-10 are still very confident, according to the 19th Annual Retirement Confidence Survey (RCS) released by the nonpartisan Employee Benefit Research Institute (EBRI).
The number of workers that said they feel very confident about retirement has tumbled by one-half in the last two years. Indeed, the percentage of workers who feel very confident about having enough money for a comfortable retirement was just 13% this year, down from the previous low of 18% set in 2008 (see “Retirement Confidence Plummets in EBRI Survey“) and 27% in 2007. In fact, that is the lowest since the question was first asked in the survey in 1993, and represents a 50% decline in worker confidence since 2007.
Among current retirees, confidence in having a financially secure retirement also dropped this year to a new low, with only 20% saying they are very confident; that’s down from 29% in 2008 and 41% in 2007.
“Our survey first picked up the drop in retirement confidence last year,” said Jack VanDerhei, research director at the Employee Benefit Research Institute, co-sponsor of the survey with Mathew Greenwald & Associates, a survey research firm. “Given the uncertainties that exist about economy, it is no surprise the downward trend has continued. By any measure, the two-year results amount to a very significant drop in workers’ and retirees’ confidence in their retirement prospects.”
Because of the economic downturn, many workers say they expect to work longer, the survey found, and more workers say they are planning to supplement their income in retirement by working for pay. Not surprisingly, workers overall who have lost confidence over the past year about affording a comfortable retirement most often cite the recent economic uncertainty, inflation, and the cost of living as primary factors, the RCS reported. In addition, negative experiences—such as job loss or a pay cut, loss of retirement savings, or an increase in debt—almost always contribute to loss of confidence among those who experience them.
More than a quarter (28%) of respondents said the age at which they expect to retire has changed in the past year, and of those, the vast majority (89%) said that they have postponed retirement with the intention of increasing their financial security. Nevertheless, the median (mid-point) worker still expects to retire at age 65, with just 21% planning to push on into their 70s. However, the median retiree actually retired at age 62, and almost half of retirees (47%) said they retired sooner than planned.
More workers are also planning to supplement their income in retirement by working for pay: The proportion of workers planning to work after they retire has increased to 72% in 2009 (up from 66% in 2007). This compares to 34% of retirees who report they actually worked for pay at some time during their retirement.
Among workers who have lost confidence in their ability to secure a comfortable retirement, most (81%) said they have reduced their expenses, while others are:
- changing the way they invest their money (43%)
- working more hours or a second job (38%)
- saving more money (25%)
- seeking advice from a financial professional (25%).
One ray of sunshine in the report: Among all workers, 75% said they and/or their spouse have saved money for retirement, one of the highest levels ever measured by the RCS.
On the other hand, less than half (44%) of workers report they and/or their spouses have tried to calculate how much money they will need to have saved by the time they retire—and an equal proportion (44%) simply guess at how much they will need for a comfortable retirement.
Most workers participating in a workplace retirement savings plan (72%) said that they have not changed the percentage of their salary contributed to the plan in the past year. On the other hand, 18% have increased their deferrals, compared to 11% who have decreased the percentage.
Of the roughly one-in-five (22%) workers eligible to contribute to an employment-based retirement plan but not doing so, only one in five reported that they had been contributing before October. That translates into less than 5%, which the RCS report authors said indicates that the economic downturn did not cause many eligible workers to stop contributing to their workplace retirement savings plan.
Full survey results appear in the April 2009 EBRI Issue Brief, available online here.