Some American workers are feeling better about their ability to live a good life in retirement, but savings totals show many people won’t be ready, a recent survey found.
Sixteen percent of workers say they are very confident in having enough money to retire, up three percentage points from last year. Yet 27 percent say they have less than $1,000 in savings. More than half of respondents, 54 percent, say their total value of household savings and investments is less than $25,000. Retirement income hinges on a number of varying factors, but in general, most workers need 70 to 90 percent of their salary per year to live comfortably.
The figures are coming from the 1,153 U.S. workers and retirees age 25 and older surveyed in January for the 20th annual Retirement Confidence Survey, a joint effort by the Employee Benefit Research Institute and Mathew Greenwald & Associates.
Confidence is returning because the economy is stabilizing, says Jack VanDerhei, EBRI research director and co-author of the survey.
“Unfortunately, while their attitudes are stabilizing, their preparation for retirement is not,” VanDerhei said. “A distressing number of people have no savings at all.”
Savings may have leveled off because many employers froze contributions to 401(k) plans in 2008. Historically, when employers stop contributing, so do workers, VanDerhei said.
The survey results present a strong case for automatically enrolling participants in plans and automatically escalating contribution rates, he said.
While 70 percent of defined-contribution account balances have returned to pre-2008 levels, participants have lost two years in accumulating returns on savings and investments, a separate Mercer survey of 1.2 million participants showed.
“For those closest to retirement, these lost years are particularly troubling given that most experts agree this group lacked adequate retirement savings even before the market downturn and now have that much less time to recover,” said Dave Tolve, retirement business leader for Mercer’s outsourcing business.
Forty-six percent of workers said they were not too confident or not at all confident that they would have enough money to live comfortably in retirement. So it isn’t surprising that the EBRI survey found 1 in 4 workers decided this year to postpone retirement plans and work longer.
That might be an idea they can’t actually carry out: 41 percent of the retirees surveyed said they had to retire earlier than they had planned.
Company layoffs, personal health reasons and other factors out of their control forced them to retire earlier, survey numbers showed. Seventy percent of workers expect to work for pay in retirement, up seven percentage points from 2008.
“Not everyone gets to work as long as they want to,” VanDerhei said. “There are so many factors beyond their control.”
While the data in this survey show the majority of participants not saving enough, a separate March EBRI study projected end results for workers in plans using automatic enrollment and automatic contribution escalation. Participants from all income levels in this type of plan had higher benefit levels than participants in plans with voluntary enrollment.
“There are some employers that may not be concerned whether a 25-year-old is saving adequately,” VanDerhei said. “But any employer seriously concerned about managing their workforce needs to consider automatic enrollment and escalation.”
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