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Encore
A blog about living in and planning for retirement

Rising Stocks Not Raising Retirement Hopes

Despite recent improvements in the economy and stock market, Americans are no more confident in their ability to retire comfortably than they were last year, when confidence levels among workers hit an all-time low. That’s the conclusion of a survey the nonprofit Employee Benefit Research Institute (EBRI) published Tuesday.

Aside from a sluggish economy and job market, the low confidence levels likely “reflect a more practical and realistic perspective” on what it will take to adequately prepare for retirement,” says Greg Burrows, a senior vice president at The Principal Financial Group, one of several companies that underwrote the survey, which has been conducted annually for the past 22 years and includes responses from 1003 workers and 259 retirees this year.

Overall, the news about retirement readiness isn’t good. For example: •       Only 14% of workers are very confident that they will have enough to live comfortably in retirement—a level that is virtually unchanged since 2011’s survey. While another 38% are “somewhat confident,” half of all workers express some degree of worry. •       Among retirees, only 21% are very confident, with another 42% somewhat confident. •       When it comes to covering basic expenses throughout retirement, only 26% of workers and 32% of retirees are very confident. Fewer express confidence about meeting medical and long-term-care expenses.

The responses are not surprising, considering that 60% of workers put the total value of their savings and investments–excluding home values–at less than $25,000. Moreover:

•       62% of workers and 45% of retirees report that they are under financial stress.

•       20% of workers and 12% of retirees say debt is a major problem.

•       To pay basic expenses over the past year, 34% of workers dipped into savings and 22% of retirees withdrew more than they had planned from retirement savings.

According to the survey, fewer Americans are saving at all. The problem is particularly acute among those with household incomes below $35,000. For example:

•       58% of workers say they are currently saving, down from 65% in 2009.

•       67% say they are behind on their savings goals, versus 55% in 2005. Many seem to be banking on working longer to make up for a lack of savings:

•       22% of workers expect to delay retirement.

•       Almost 20% expect to retire after age 65, versus 11% in 1991.

Still, working longer may not be realistic, given the experience of current retirees. •       Just 8% of workers plan to retire before age 60. Another 16% want to retire between 60 and 64. But among retirees, 40% retired before age 60 and another 25% did so before 65.

•       70% of workers plan to work for pay in retirement. But only 27% of current retirees have jobs.

The authors also compared the expectations of those between ages 55 and 64 who responded to EBRI’s 2002 survey to the actual experiences of the same age cohort in 2012’s survey.  By and large, they had retired sooner and are working less and relying to a greater extent than they had expected to on Social Security.

Still, there are some positives, Mr. Burrows says. “Individuals who have either done calculations of their retirement savings needs or who are actively participating in a retirement savings plan report a confidence level that is 30% higher than” those who have not taken such steps, he says. The same is true of those who have received advice from a financial professional or who have little to no debt.

Among respondents, those in better shape typically also include men, married couples, and workers over 45. The proportion saying they have saved for retirement rises with education level, income and health status.

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    • I think it’s pretty likely that the ratio of people over age 60 who are working trends higher. We can’t use the existing cohort of retirees as an example because today’s middle-aged are healthier and can expect to live longer than our predecessors, so we can probably stay on the job for longer. Plus work that is too physically demanding for the over-60 set is becoming rarer.

      That said I think it’s far better to stay on longer by choice rather than being forced into it. Where I work we have a mixture of plums and drudge, and you can guess which tasks the folks who are deep in debt get assigned. My job has gotten more pleasant as I depended on the income less.

    • Even the responses of expecting to delay retirement, or work during retirement show the same pattern of putting off difficult things. Many would rather say they’ll work longer, than make changes today. Do I sell the extra car, or claim I’ll work ’til I’m 70? Folks just don’t get it. Take care of it now, suffer a bit today to make the rest of your life easier. I’m early retired and loving every minute of it.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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