Despite signs of economic recovery, a new survey says Americans’
confidence in their ability to afford a comfortable retirement
remains at historic lows as workers appear to be grasping the realities
of what they need to save.
annual Retirement Confidence Survey, released today by the
Benefit Research Institute (EBRI) in Washington, and co-sponsored by
Financial Group®, finds overall confidence levels are
essentially unchanged since the record lows set in 2011.
Only 13 percent are very confident they will have enough money for a
comfortable retirement. A full 28 percent1— the highest
number recorded during the 23 years of the survey—are not at all
Workers have growing doubts about their ability to pay for basic
expenses in retirement and are least confident about being able to
afford medical costs and long-term care.
The lack of confidence may also stem from a finding that workers seem to
be realizing just how much they may need to save. Nearly 70 percent say
they need to set aside 10 percent or more of total household income to
fund a financially secure retirement. Four in 10 put the target at 20
percent or more.
Despite those projections, the survey finds less than half are taking
steps to prepare and total savings remain modest. Saving and planning
for retirement are overshadowed by immediate worries about job
certainty, daily expenses and debt.
“Especially in the face of current financial challenges, Americans need
a plan for saving and spending so they can manage short-term needs and
better prepare for the long-term,” said Greg Burrows, senior vice
president of The Principal®, a long-time underwriter of the
Retirement Confidence Survey. “Using an online calculator or working
with a financial professional to assess savings needs helps with setting
realistic goals and getting on track toward a more secure future.”
The survey shows overall retirement confidence is 20 – 40 percent higher
among workers who take positive financial actions including calculating
retirement savings needs, saving in an employer-sponsored plan and
getting advice from a financial professional.
Among other key findings available on the EBRI website at www.ebri.org:
Workers open to automatic enrollment. Among those not
participating in a retirement plan, 88 percent of those responding
would continue to contribute if automatically enrolled at a three
percent deferral rate and 83 percent would continue to contribute if
enrolled at six percent.
Tax incentives matter. Nearly half (45 percent) of workers
would stop or reduce the amount they contribute to their
employer-sponsored plan if they could no longer do so on a pre-tax
basis. Lower income workers ($35,000 or less) would be much more
likely to stop contributing if the tax incentive was removed.
Savings preparations decline despite growing concerns. The
percentage of workers reporting they or their spouses had saved for
retirement had increased briefly in 2009 to 75 percent but has slowly
declined and now stands at 66 percent.
Many still guess at savings needs. Forty-five percent of
workers guess at how much they need to accumulate for retirement
rather doing a systematic calculation.
Low overall savings. More than half of workers report less than
$25,000 in total household savings and investments, excluding the
value of the primary home or any defined benefit plans.
About the Retirement Confidence Survey
This is the 23rd
annual Retirement Confidence Survey, making it the longest-running
annual survey of its kind in the nation.
The annual Retirement
Confidence Survey is conducted by the nonpartisan Employee Benefit
Research Institute (EBRI) and Mathew
Greenwald and Associates. The Principal
Financial Group is among about two dozen organizations that provided
funding for the survey. Full results are on the EBRI Website at www.ebri.org
More information on savings tools and resources are online at www.principal.com
and for more news and insights from The Principal, connect with us on
Twitter at http://twitter.com/ThePrincipal.
About the Principal Financial Group
The Principal Financial Group® (The Principal ®)2
is a global investment management leader offering retirement services,
insurance solutions and asset management. The Principal offers
businesses, individuals and institutional clients a wide range of
financial products and services, including retirement, asset management
and insurance through its diverse family of financial services
companies. Founded in 1879 and a member of the FORTUNE 500®,
the Principal Financial Group has $403.0 billion in assets under
management3 and serves some 18.3 million customers worldwide
from offices in Asia, Australia, Europe, Latin America and the United
States. Principal Financial Group, Inc. is traded on the New York Stock
Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
1 Statistically equivalent to the record low recorded in 2011.
2 “The Principal Financial Group” and “The Principal” are
registered service marks of Principal Financial Services, Inc., a member
of the Principal Financial Group.
3 As of Dec.31, 2012