Saving for Retirement Easier Said than Done

Despite belief they will need to set aside a large portion of income to have a secure retirement, Americans seem unable to do so.

According to the 23rd annual Retirement Confidence Survey (RCS) conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Americans’ confidence in their ability to afford a comfortable retirement remains low. While more than half express some level of confidence (13% are very confident, and 38% are somewhat confident of being able to afford a comfortable retirement), 21% are not too confident, and 28% are not at all confident. The latter figure is the highest level of those not at all confident recorded during the 23 years of the survey, EBRI said.

Greg Burrows, SVP of retirement and investor services at Principal Financial Group, an underwriter for the survey, told PLANADVISER there are several reasons workers are still not confident despite a seemingly improved economic outlook: nearly 60% of respondents indicated they have less than $25,000 saved for retirement, nearly half are still guessing at how much they will need for a secure retirement and not using tools, more than half have household debt and nearly 40% have trouble with day-to-day living expenses. He also noted that nearly half of workers in the survey indicated if tax incentives for retirement savings were eliminated, they would reduce how much they save or stop saving for retirement. The uncertainty about tax treatment could be “another contributing factor to lack of confidence,” he said.

Workers in the survey express the highest levels of confidence about their ability to pay for basic expenses in retirement (25% very confident). They are less confident about their ability post-retirement to pay for medical expenses (14% very confident) and least likely to feel very confident about paying for long-term care expenses (11%).

Burrows added that workers who are taking positive actions such as using calculators and other planning tools, participating in their employer-sponsored plans and consulting with a financial adviser have confidence levels that are 20% to 40% higher than other workers. So, for plan sponsors, helping workers know how to take positive actions will help them be more confident.


The survey suggests workers may be waking up to just how much they may need to save. Asked how much they believe they will need to save to achieve a financially secure retirement, a striking number of workers cite large savings targets: 20% say they need to save between 20% and 29% of their income and nearly one-quarter (23%) indicate they need to save 30% or more.

According to Burrows, 70% of workers indicated they need to be saving 10% or more of their income to achieve a financially comfortable retirement. “This is a much more realistic perspective of what savings should be, and it matches our research that indicates workers should be saving 11% to 15% of their income over their entire working career,” he said.

Despite these large savings targets, worker savings remain modest, and less than half appear to be taking the basic steps needed to prepare for retirement. Among workers providing this information in the RCS, more than half (57%) report less than $25,000 in total household savings and investments (excluding the value of their primary homes and any defined benefit pension plans).

According to the survey, workers often guess at how much they will need to accumulate for a secure retirement (45%), rather than doing a systematic retirement-needs calculation. Eighteen percent indicated they did their own estimate, and another 18% asked a financial adviser, while 8% used an online calculator, and another 8% read or heard how much was needed.

Just 23% of workers and 28% of retirees report they have obtained investment advice from a professional financial adviser who was paid through fees or commissions. Of these workers, 27% followed all of the advice given, but more disregarded some of the advice by only following most (41%) or some (27%).

Debt appears to be a factor standing in the way of saving: 55% of workers and 39% of retirees report having a problem with their level of debt. However, cost of living and day-to-day expenses heads the list of reasons why workers do not contribute (or contribute more) to their employer’s plan, with 41% of eligible workers citing this factor. “Many lack even a short-term cushion,” noted Matt Greenwald of Greenwald & Associates. “Only about half of workers and a comparable number of retirees say they could definitely come up with $2,000 if an unexpected need arose within the next month.”


The RCS finds that retirement savings may be taking a back seat to these more immediate financial concerns: Just 2% of workers and 4% of retirees identify saving or planning for retirement as the most pressing financial issue.

The percentage of workers who reported they and/or their spouses had saved for retirement increased briefly in 2009 (to 75%), but this percentage has slowly declined and now stands at 66%. One of the primary vehicles that workers use to save for retirement is an employer-sponsored retirement savings plan. Eighty-two percent of eligible workers say they participate in such a plan with their current employer, and another 8% of eligible workers report they have money in such a plan, although they are not currently contributing.

“Plan design matters and can really drive different savings behaviors and rates,” Burrows told PLANADVISER. Among workers in the survey that indicated they are not participating in their employer-sponsored retirement plan, 83% said if their employers automatically enrolled them into the plan at a 6% deferral rate, they would stay in the plan. More than 60% said they would stay in the plan if auto enrolled at 6% or more.

Burrows added that among Principal’s clients, only 7% of workers that have a choice to voluntarily increase their annual deferrals by 1% take advantage of that option, but 82% of employees who have deferrals automatically increased, stay with the new savings rate. “There is a significant difference between having the ability to take action and having the plan design do it for you,” Burrows concluded.

Full results of the 2013 RCS are published in the March 2013 EBRI Issue Brief available at