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Retirement Confidence at Rock Bottom – Working Longer Seen as Solution

Category: Financial and taxes in retirement

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.

For further reference
Part II of this series: “Is There a Reverse Mortgage in Your Future
NPR Marketplace Podcast – The Retirement City Where People Work

What do you think?
We look forward to your comments, suggestions, and input using the Comments section below.

Posted by John Brady on March 21st, 2010


  1. Some Stats on Social Security with respect to “But there is a solution – working longer.”

    In the year 1937, the year Congress enacted and the Supreme Court vetted the Social Security Act, life expectancy for males was 58 years, for females, 62.4 (that is: those born in 1937 could expect to live until 1995 and 1999.4, respectively). (
    In 2010, (projected) life expectancy is 75.7 years for men, 80.8 for women. (US Census)
    Do the math: men now (can expect to) live nearly 17.7 years longer than in 1937; women, 18.4.
    Yet the age that people* (see below) can start drawing their full SS allotment has increased by only 2 years – from 65 to 67.
    So, one might conclude, no big deal about working longer. A 2010’er could work until 70 and still collect for a 12 -13 years more than a 65’er in 1937.

    But, as Mark Twain pointed out, “There are three kinds of lies: lies, damned lies, and statistics.”
    Given infant mortality rates (high then; less now), life expectancy from birth is far less important than life expectancy from adulthood because around age 21 is when people begin contributing to social security.
    Now, the relevant numbers are that in 1940, a 65 year-old male could expect to live 12.7 more years; a female, 14.7 more years. By 2005, a male 65’er could look forward to 16.7 more years; his distaff counterpart, 19.49.
    ( In other words, a male 65’er today could work 4 more years than his 1937 self and still draw SS for the 12+ alloted years. Today’s retiring female, work until almost 70 and still get the 14+ of SS benefits her 1937 incarnation received.

    * “people”. Excluded occupations were farm, hospital and household labor, federal workers, many teachers, librarians, and social workers. Also excluded: part-time, migrant, temporary. Most women qualified through their husband’s jobs.

    by oldnassau'67 — March 24, 2010

  2. […] This is the second of a multi-part article on retirement confidence and the ability of retirees to have a comfortable retirement. The first article was called “Retirement Confidence Hits Rock Bottom“. […]

    by » Reverse Mortgage Might Be in Your Future Topretirements — March 30, 2010

  3. I found your article to be right on target. Now I would appreciate your explaining to me just who is buying all those fancy retirement condos that cost $200,000 and more plus huge monthly HOA and condo fees. If 80% or so of us aren’t even sure we will have money for food and medicine, where is the customer base for the resort style retirement communities?

    by Rose — March 31, 2010

  4. I think, in a small way, that I might represent some of the people you are asking about. I worked for the Federal Gov’t for over 33 years and in private industry for 2 years. Consequently, because of my government service, I am one of those people that get some of their retirement income by way of a pension. As noted above, pensions largely seem to be going the way of the dodo bird. While no one that I know personally has gotten rich from working for the Gov’t, at the end of the road, there was (at least) a pension. In addtion, I have always recognized that no matter what you earned, that the concept of paying oneself first was key. Consequently, I have been an investor my entire adult life and always took advantage of things like employee 401K and similar plans especially if they were matched to any degree by the employer. I also believed in stocks and that by being too conservative you never get ahead despite the volatility of the market. My wife, who worked for a bunch of cheapskate doctors, like most small company employees,was lucky to even have a 401K. However, her bosses only matched 1% of her contributions. Consequently, most of the money she invested was her own. She always saved at least 10 to 15% of her income and also was not overly conservative. I also live in NY where real estate values are among the highest in the country even in this crappy economy. I bought my first house at age 25 and consequently have significant equity in what is now my second house. Taking into account, my pension, 401Ks. IRA’s, Social Security, as well as other personal investments, along with significant equity in my home, I think I can afford at least something in the price range you are talking about. I hardly consider myself rich, but should probably be more thankful than I am in view of what I’m reading. I just retired at age 59 this past December and I am looking to move south and to an area where the cost of living is less costly.

    by Artie — April 1, 2010

  5. […] 15 percent. These pessimistic statistics are very close to what was reported earlier this year in a survey from the Employee Benefit Research Foundation. A frightening statistic is in the savings […]

    by » Retirement for Younger Baby Boomers Will be a Different Experience Topretirements — April 27, 2010

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