March 20, 2010 — According to a new study from the Employee Benefit Research Institute (EBRI), worker confidence about their retirement has hit rock bottom. The 2010 Retirement Confidence Study found that the percentage of workers who are very confident about having enough money for a comfortable retirement has stabilized at 16 percent, statistically equivalent to the record low 13% reported in 2009. Among workers who are already retired, the confidence index is slightly better at 19%.
These numbers paint a very discouraging picture about retirement – only 1 in 5 retirees predict they will have a financially secure retirement. And current workers feel even less confident. Unfortunately, the EBRI study turned up bad news about other aspects of retirement confidence. For example, only 29% of workers believe they will have enough money to cover basic expenses in retirement. Only 19% of retirees say they are very confident about having saved enough money to live comfortably in retirement.
When it comes to savings, it’s clear that most Americans have done a terrible job of preparing for retirement. Fully 27% of American workers have no significant retirement savings (less than $1000 and excluding the value of their residence), the same percentage of retirees who have no savings accumulated. Only 60% of workers are currently saving for retirement. More than half (54%) of workers have less than $25,000 in savings. Only 12% of retirees have saved more than $250,000. Less than half have even tried to calculate how much they need to save for retirement (which, by the way, is a LOT more than $25,000). Of those who have tried to calculate what they need for a comfortable retirement, 54% say that they need at least $500,000.
Obviously, if one is unemployed, one can’t be saving money. On the other hand, it is unclear what the people who are working but not saving anything expect to retire on. The facts of retirement in this century are not encouraging. For most people the idea of a pension has disappeared – today only government workers and the rare employee in a private company can count on a monthly pension check in retirement. So for most people, social security payments will help pay for basic expenses, and savings will have to pay for anything extra. Those extra expenses might include travel, transportation, and gifts – but they might also include much higher medical insurance costs than most people have predicted.
The Solution – Working Longer
In 1991 the EBRI found that 11% of Americans expected to work past the age of 65. In the subsequent years that percentage has continued to climb, it has tripled to 33% in 2010.
We apologize for painting such a bleak picture, even if it is the stark reality of retirement today. But there is a solution – working longer. In future articles we will report on studies from the EBRI and the Boston College Center for Retirement Research which predict that most retirees will have to tap into their home equity via a reverse mortgage in order to survive.
What do you think?
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