Nearly one in three workers are “not at all confident” when it comes to their retirement plans.
A study released today by the Employee Benefit Research Institute shows 57 per cent of workers have less than $25,000 saved and 55 per cent cite debt as a problem standing in the way of stashing away more money for their retirement years.
The low confidence levels, the worst in the annual survey’s 23-year history, are likely still being impacted by the recent recession, says retirement expert Greg Burrows, a senior vice president for Principal Financial Group.
“If you look back, the confidence level was definitely higher. Once 2008, 2009 hit, the confidence level became less,” Burrows tells us. “Myself and the folks at EBRI might argue that before confidence levels were unrealistically high. Maybe today, it’s becoming more realistic.”
Survey data was collected in January based on calls with more than 1,200 workers and retirees ages 25 and older. Burrows points out a few key findings from the survey to explain why retirement confidence has dipped:
1. The way people are planning to pay for retirement is changing. Back in the 1990s, only 11 per cent of workers planned to work past age 65, says Burrows. Now, that number has risen to 35 per cent. But often, retirees have to leave the work force earlier than planned due to health concerns or other factors, making that goal unattainable. “It’s more appropriate for people not to plan to work past 65,” Burrows said. “If they’re in any position to do so, they should.”
2. People are focused on the day-to-day rather than the longterm. 40-one per cent of workers said paying off current cost of living expenses is making it more complicated to pay for retirement. And 30 per cent of workers listed job uncertainty as their most pressing financial issue weighing on their mind, making retirement more difficult to plan for. “Household debt is still weighing on them,” Burrow said. “It’s having an impact on confidence level.
3. Retirement savings targets are rising. The survey showed one in five workers believe they need to save 20 to 29 per cent of their income toward retirement. And 23 per cent said their savings goals were larger than 30 per cent of their income. Those are lofty goals, but on a positive note, Burrows said the vast majority of workers surveyed said they were enrolled in even a low-level retirement savings plan through their employer, and they would stick with it. “Plan design could help people stay on track,” he said.
4. Nearly half of workers are guessing at how much they need to save. That’s disheartening since there are numerous tools online that can help people gauge their savings goals. “The ones that I would encourage readers to focus on are those that focus on saving and spending,” he said. “It’s really difficult for people to increase saving if don’t decrease spending.” Burrows said workers that said they had used a financial calculator or consulted an expert or financial planner were 20 to 40 per cent more confident than those who hadn’t.
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