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Retirement Confidence Remains Resilient

Despite taking a beating during a tumultuous period in the markets, America’s retirement confidence proved to be resilient, if not its level of preparation.

According to the 26th wave of the Retirement Confidence Survey, the percentage of workers very confident about having enough money for a comfortable retirement held strong at 21% in 2016, compared with 22% a year ago, and 13% as recently as 2013. It also found increases in the percentage of those somewhat confident, as well as decreases in the not-at-all-confident. Moreover, this move out of the not-at-all-confident group was observed primarily among those reporting they or their spouses do not have a retirement plan (defined benefit, defined contribution, or individual retirement account).

Retirement Plan Matters

Indeed, retirement confidence is strongly related to retirement plan participation. Workers reporting they or their spouse have money in a DC plan or IRA or have benefits in a DB plan from a current or previous employer are more than twice as likely as those without any of these plans to be very confident (26% with a plan vs. 10% without a plan). Additionally, workers without a plan are more than three times as likely to say they are not at all confident about their financial security in retirement (11% with a plan vs. 38% without a plan).
  

Interestingly enough, while the increase in confidence between 2013 and 2015 occurred primarily among those with a plan, the changes in confidence in 2016 occurred among those without a plan. Among those without a plan, the percentage somewhat confident increased from 21% in 2015 to 29% in 2016, and the percentage not-at-all-confident decreased from 44% to 38%, though the percentage very confident remained statistically unchanged among those without a plan (12% in 2015, 10% in 2016).

Savings Levels

But while confidence is one thing, justification in that confidence may be something else. Among RCS workers providing this type of information, just over half (54%) report that the total value of their household’s savings and investments, excluding the value of their primary home and any DB plans, is less than $25,000, including 26% who say they have less than $1,000 in savings.

However, the data not as likely to make its way into a headline is the gap between those who have a retirement plan and those who don’t. Two-thirds (67%) of those without a retirement plan say their assets total less than $1,000, compared with fewer than 1 in 10 of those who have a plan. 

Correspondingly, workers without a retirement plan are far less likely than those with a plan to report assets of $100,000 or more (5% vs. 34%). The same differences in asset holdings among retirees having and not having a retirement plan were also found.

Another distinction likely to be obscured in the coverage is age; while 75% of workers ages 25-34 say they have total savings and investments of less than $25,000, that’s the case for just 33% of those 55 or older. At the same time, 30% of workers ages 55 or older cite assets of $250,000 or more (vs. 2% of workers ages 25-34).

Regardless, an important aspect to keep in mind is that without knowing individual factors like age or income, it’s impossible to discern whether those amounts are woefully inadequate or reasonable.

Savings Goals?

Not that workers aren’t aware of the need; 17% say they need to save between 20% and 29% of their income in order to live comfortably through retirement, while another 22% indicate they need to save 30% or more. On the other hand, roughly one in five (22%) say they do not know how much they should be saving — oh, and 12% think they’ll need to save 50% or more.

Some of that savings may have been directed toward debt reduction, since Americans are less likely now than in the early years of this decade to describe their debt as a problem; 15% of workers (down from 22% in 2011) and 8% of retirees (compared with 15% in 2011) report their level of debt is a major problem, while an additional 40% of workers and 24% of retirees describe it as a minor problem. Similarly, nearly half (47%) of workers say debt is not a problem for them, an increase from the 37% measured in 2011. A full two-thirds (67%) of retirees surveyed report they do not have a problem with debt, up sharply from the 55% who said the same in 2014.

As has been the case in previous iterations of the RCS, fewer than half (48%) of workers report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement.

These findings are part of the 26th annual RCS, which gauges the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The survey was conducted Jan. 2-Feb. 3 via 20-minute telephone interviews with 1,505 individuals (1,000 workers and 505 retirees) age 25 and older in the United States.