The percentage of Americans who feel confident about their ability to live comfortably in retirement is at an all time low, according to a survey conducted by the Employee Benefits Research Institute, or EBRI.
Almost half of all American workers and retirees are feeling uncertain about retirement, according to the survey. Twenty-one percent of survey respondents indicated they're "not too confident" about being able to afford a comfortable retirement, while 28 percent said they're "not at all confident." The EBRI has been conducting this survey for 23 years and the group says 28 percent is the highest level of uncertainty ever recorded.
One explanation for the low level of confidence despite the improving U.S. economy could be that workers are beginning to realize how much money they need to save for retirement, the report says. When asked what they believe would be a necessary amount to save for a comfortable retirement, 20 percent of workers said they need to save between 20 and 29 percent of their income, while 23 percent said they would like to save 30 percent or more.
Forty-five percent of workers only guess at how much they actually need to save rather than doing a formal retirement-needs assessment, according to the report. The EBRI says workers who have calculated their retirement savings needs tend to be more confident than those who haven't.
The report also indicates a relatively small number of U.S. workers (23 percent) have obtained financial advice from a professional adviser. And of that group, only 27 percent followed all of the advice, 41 percent followed most of it, and 27 percent followed some of it.
Other reasons affecting retirement confidence are more immediate concerns, such as debt and the cost of retirement, according to the report.
Despite concerns about retirement costs, less than half of all survey respondents indicated they're taking the basic steps to prepare. Fifty-seven percent of workers report having less than $25,000 in savings and investments, excluding the value of their primary homes and any defined benefit pension plans, according to the report.
And when it comes to debt, 55 percent of workers and 39 percent of retirees reported having a problem with the amount of money they owe, which then negatively affects a worker's willingness and ability to contribute to employer-sponsored retirement plans, according to the survey.
Nevin Adams, co-author of the survey, said in an email that the high amount of workers who are unprepared for retirement could have negative consequences for the American economy. "The broader implications of so many not being prepared are not hard to envision; a larger draw on entitlement programs like Social Security and Medicare, people living their 'golden years' at a bare-bones level, and in terms of the overall economy, the prospects for impact on consumer spending as well."
Employers can help workers plan for retirement by providing them with tools that would allow them to determine an adequate savings goal, said Adams, who added that employees who set savings goals are usually more confident about their retirement.
Adams said employers can also help employees by offering retirement plans with immediate or automatic enrollment as well as default contribution rates. The survey "shows that a large number of those not currently offered the chance to save would accept a default of 6 percent," he said.