An increasing number of workers are seriously worried they will not have enough money to retire comfortably, according to the Employee Benefit Research Institute 2011 Retirement Confidence Survey that dropped today.
The 1,004 workers were surveyed in January, when the stock market was going up and unemployment going down, so one might have imagined people would be a little more upbeat about their futures.
But no go. They found the most pessimistic levels of confidence among American workers that RCS has ever measured, in more than two decades of this survey, says Jack VanDerhei, EBRI research director and co-author of the report.
And that’s “perhaps unusual,” he says. Are you kidding me? Did he really think it was a little odd?
Well, not entirely. “We know from previous surveys that far too many people had false confidence. People’s expectations need to come closer to reality so they will save more and delay retirement until it is financially feasible.”
In other words, while the findings are gloomy, there is a silver lining here, perhaps. They show that people are aware of their fear. The first step to recovery is admitting you have a problem.
“Americans are beginning to recognize the level of savings needed for a comfortable retirement. Now it’s critically important to take steps to improve the chances they’ll have enough,” observes Greg Burrows, senior vice president, retirement & investor services at Principal Financial Group, a co-sponsor of the EBRI survey. “Simple actions, like calculating how much is needed for retirement, increases saving, and creating a plan can help get savers on realistic paths to a secure retirement,” he advises.
Here are five key findings of the survey:
1. “The new normal”– more workers now expect to work for pay in retirement. Seventy-four percent report they plan to work in retirement (up from 56 percent in 1998).
Workers would rather plan to work in their retirement years than make fundamental adjustments to their spending and saving patterns even though they are clearly worried about having enough money to live in retirement.
2. It’s not that they aren’t saving. Sixty-eight percent of workers report they and/or their spouse have saved for retirement (down from 75 percent in 2009, but statistically equivalent to the 2010 level). Fifty-nine percent say they and/or their spouse are currently saving (down from 65 percent in 2009, but statistically equivalent to earlier years).
3. Savings totals are dangerously low. In total, more than half of workers (56 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.
4. What savings goals? Many workers continue to be unaware of how much they need to save for retirement. Only 42 percent report they and/or 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. And well over a third (42 percent) say they came up with the number by guessing.
5. Retirement age is creeping up. In particular, the percentage of workers who expect to retire after age 65 has increased over time, from 11 percent in 1991 and 1996 to 20 percent in 2001, 25 percent in 2006, and 36 percent in 2011.
Doom da doom. It’s pretty hard to be confident about retirement these days. The older you get, the harder it is to find new work if you have lost a job, the higher your chances of being lopped off in a downsizing move by your employer and yep, we all know the backstory:
We’re living longer, healthier lives, full benefits from Social Security continue to come at later ages; rising Medicare premiums and other health costs, and caring for aging parents takes a toll.
I know about this one. Three years ago, when my Dad was in the end stages of Alzheimers, he spent a blessedly brief time at Sunrise of Fox Chapel, a senior assisted living facility in Cheswick, Pa., whose “memory care unit” is designed specifically for Alzheimer’s and dementia patients. The monthly out of pocket tab topped four grand. For more on that painful chapter, read my family’s story.
My mom is still going strong at 81, but all four of us kids are aware that we may have bills at some stage to manage.
I suspect I am not all that different from the folks EBRI canvassed. I can’t imagine retiring and living the kind of lifestyle I do today.
The quaint idea of a retirement padding around a golf course, gardening, or wait…spending more time on my yacht…as Quant king James Simons, who made a fortune in hedge funds, has reportedly been doing since he stepped down from day-to-day management of Renaissance Technologies in October of 2009….is changing for most boomers.
Forgive me for the aside, but it is retirement-related, sort of. I had to toss Simons in here because I can’t get him out of my mind. Last week in St. John in the U.S. Virgin Islands, I stood, barefoot and bathing-suit clad with my 19-year-old niece Caitlin, gawking politely at his big blue yacht, the Archimedes. She is an estimated 220-feet long and was docked outside of Cinnamon Bay.
I saw the 72-year old billionaire quietly come ashore in a dingy, presumably with his wife and daughter, accompanied by a handful of crew members. The boat can accommodate 18 passengers, plus 17 crew or thereabouts, according to the youthful and crisply-attired crewman I chatted with briefly. The Archimedes has been sailing the seas of the world since she was launched three years ago.
When Simons retired, he reportedly said he planned to spend more time on his yacht and tending to his philanthropic work, including math education and fighting autism. (His family’s charitable foundation has committed $38 million to find the causes related to autism in recent years, and plans to spend another $100 million in what is becoming the largest private investment in the field of autism research.)
What a sweet ship he commands. I wish I was in his Topsiders.
What the Retirement Confidence Survey confirms is what we all know.
Career transition in retirement is the “new normal”. You will probably keep working at something in your 60s and even your 70s. It may be related to what you do now, or something different that inspires you.
Plan ahead for it. Don’t make it an afterthought. It will probably be part-time, but consider some kind of paying work as one of the pillars of your retirement plan.
Here’s my reasoning: In the survey, many workers say they expect to work in retirement as a way to make ends meet, presumably since they are worried about having enough saved. But the fact is, the RCS has consistently found that workers are far more likely to expect to work for pay in retirement than retirees are to have actually worked. Only 23 percent of retirees report they worked for pay in retirement. So intentions may be one thing and reality another.
There is a disconnect here, which is why you need to plan ahead if that pay is going to be critical to your retirement comfort. I’m 50, and I’ve been saving for decades via 401 (k) plans and IRAs. I don’t have any hope of a traditional pension provided by an employer. It’s all up to me to make smart decisions so I don’t outlive my money.
That’s a load of responsibility, even when you’ve spent most of your career learning and reporting the ins and outs of personal finance. I can’t imagine how scary that is when money is a foreign language. But I am beginning to put a work plan in place for my future.
I wonder if there are any openings on the Archimedes. Anyone have Simons’ e-mail? And pass the Margarita.