Americans’ Preparations for Retirement Continue to Erode 

 

Americans’ confidence in their ability to retire appears to be stabilizing but their self-described preparations for retirement continue to erode, according to the 2010 Retirement Confidence Survey by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald and Associates, a market research firm, which fielded the survey in January 2010.

The responses show that a growing number of American workers are planning to delay retirement, which has negative implications for the U.S. job market where unemployment remains high in 2010. As older workers stay at their jobs longer, fewer jobs are likely to open up.

In addition, the survey reveals that Americans continue to lack confidence in institutions, and that they are most likely to express confidence in private employers and least likely to express confidence in the federal government. Significantly, workers and retirees express low levels of confidence in banks and insurance companies.

“Americans’ attitudes toward retirement have clearly tracked the economy the last couple of years, and that seems to be the case in 2010,” says Jack VanDerhei, EBRI research director and co-author of the survey. “Unfortunately, while their attitudes are stabilizing, their preparation for retirement is not. A distressing number of people have no savings at all.”

Among 2010 survey highlights:

• Fewer are saving. Fewer U.S. workers report that they and their spouse have saved for retirement (69 percent, down from 75 percent in 2009). Moreover, fewer workers say that they and their spouse are currently saving for retirement (60 percent, down from 65 percent in 2009).

• Ranks of those with no savings are growing. An increased percentage of workers report they have virtually no savings or investments. Among respondents, 27 percent say they have less than $1,000 in savings (up from 20 percent in 2009). More than half of workers (54 percent) report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.

• Workers postponing retirement. One-quarter of workers (24 percent) have postponed their planned retirement age in the past year. Among the reasons cited for delaying retirement are the poor economy (29 percent of those postponing retirement), a change in their employment situation (22 percent), inadequate finances (16 percent) and the need to make up for losses in the stock market (12 percent).

• Later retirement expected. Although the age at which workers report they expect to retire shows little change from 2009, a longer-term look finds significant change. In particular, the percentage of workers who expect to retire after age 65 has increased from 11 percent in 1991 to 14 percent in 1995, 19 percent in 2000, 24 percent in 2005, and 33 percent in 2010.

• Clueless about savings goals. Many workers continue to be unaware of how much they need to save for retirement. Less than half of workers (46 percent) report that they and their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement.

• Some reality testing on needed savings. The savings goals cited by workers who have done a retirement needs calculation have increased. In the 2000 survey, 31 percent said they needed to accumulate at least $500,000 for retirement. This percentage gradually increased to 43 percent in 2005 and to 54 percent in 2010.

• Investing confidence ticks up. Those who have saved for retirement have recovered some confidence in their ability to invest their savings wisely. Thirty-two percent of workers who have saved indicate that they are very confident (up from 24 percent in 2009) and 54 percent are somewhat confident. Retirees who have saved for retirement show a similar rebound in confidence that they are investing their savings wisely, with 82 percent saying they are very or somewhat confident (up from 70 percent in 2009).

• Sources of retirement income. Changes in workers’ expected sources of retirement income have changed. Fewer workers are expecting to receive retirement income from Social Security (77 percent, down from 88 percent in 1991) and defined benefit plans (56 percent, down from 62 percent in 2005). However, more workers report that after retirement they will rely on income from employer-sponsored retirement plans (75 percent in 2010, up from 69 percent in 2005) and employment income from part-time or other post-retirement jobs (77 percent, up from 70 percent in 2005).

• Guaranteed income products. Few workers report they are likely to purchase a financial product or select a retirement plan option that pays them guaranteed income each month for the rest of their life. Only 11 percent indicate they are very likely to do so, while 35 percent say they are somewhat likely. Only 14 percent of retirees report that they purchased a guaranteed-income product or selected a guaranteed-income option from a retirement plan.

The survey was conducted in January 2010 through 20-minute telephone interviews with 1,153 individuals (902 workers and 251 retirees) age 25 and older throughout the U.S. Random-digit dialing was used to obtain a representative cross section of the U.S. population. To increase representation further, a cell-phone supplement was added to the sample.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

401(k) Balances Up, but ‘Lost Years’ Still Troubling, SHRM Online Benefits Discipline, March 2010

Americans Delay Retirement for Benefits and Busyness, SHRM Online Benefits Discipline, March 2010

Men, Women Differ on Retirement Investing Strategies, SHRM Online Benefits Discipline, March 2010

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