Good news! Post-recession, people are more confidant than ever about their finances – but you’d better have a pension, 401(k), or IRA.
If you want to feel confident about your ability to afford a retirement plan, you had best read this.
That’s been a constant in looking at people who are both approaching and already in retirement, but the 25th annual survey from the Employee Benefit Research Institute in Washington, D.C. shows that both workers and retirees are more confident about their capability to afford retirement than they have been in recent years (looking at you, Great Recession). The one caveat is that even though more people feel that way, there are still plenty who aren’t taking enough steps to accomplish their goals.
The survey shows a rebound in confidence levels that dipped to record lows between 2009 and 2013 in the aftermath of the Great Recession. Only 14 percent of households with a 401(k) or an IRA aren’t confident about having enough money in retirement, says Jack VanDerhei, the institute’s research director and co-author of the report. That is in contrast to 44 percent of workers without a retirement plan who aren’t confident at all.
“Those without a retirement plan seem to understand they are likely to have difficulties accumulating adequate financial resources for retirement,” VanDerhei says.
The latest numbers show that confidence levels of workers increased to 22 percent in 2015, up from 13 percent in 2013 and 18 percent in 2014. Another 36 percent are somewhat confident, the survey says.
That contrasts to 24 percent who aren’t confident, which is similar to levels in 2013 and 2014, officials say.
Of those with a retirement plan, who seem to be taking retirement seriously, 37 percent say they’re confident in their ability to pay for expenses, up from 25 percent in 2013. When it comes to medical expenses, 18 percent say they’re confident now, up from 12 percent in 2011. Some 14 percent are confident about paying for long-term care, up from 9 percent in 2011.
“After reaching the low point a couple of years ago, the level of people who are very confident in paying for their retirement expenses has increased,” says Craig Copeland, a senior research associate and co-author of the report. “It has doubled since 2013. They’re more comfortable because they have more money. The stock market has been good the last couple of years, their job has been steady. Certainly, those with retirement plans are optimistic. They have the resources and look like they have figured out the first steps of what they need in retirement. But even among those people that have a plan, there’s still work to be done. Their savings [might] still not be at the level they need to have a comfortable retirement financially.”
Still, these baby boomers’ retirement strategy contrasts with those who don’t have a retirement plan at all, have little in savings, and don’t appear to be doing much about it. Only 23 percent of those without a plan have done calculations to determine what they need in retirement.
“They’re not feeling the optimism because the stock market and economy is not affecting them,” Copeland says. “They’re still without a plan and still haven’t prepared for retirement, so they don’t have a lot to look forward to in retirement.”
Some 64 percent of those without a pension, IRA or 401(k) have saved less than $1,000, and many of those realize that they’re going to have to work longer than planned and rely on Social Security for a lot of their income.
“Workers still expect to work longer to make up for any savings shortfalls,” Copeland says. “However, many retirees continue to report that they retired before they expected to due to an illness or disability, needing to care for others, or because of a change at their job. Consequently, relying on working longer is not a solid strategy for retirement preparedness. It is really going to be a tough situation for those people come their retirement.”
For those who say they can’t save enough, 50 percent cited day-to-day expenses for the reason, even though some 69 percent say they could save at least $25 a week more than they currently do for retirement.
Among those who say they have a pension, IRA or 401(k), some 35 percent say they have at least $100,000 in it.
Savings for retirement goes up with age by a significant amount, but whether it will be enough will be answered, Copeland says. If you go back to 1995, just over 60 percent of those 55 and over had saved for retirement and now it’s 78 percent, he says.
“The younger ones aren’t coming along as fast,” he says. “As it gets more pressing, people are taking more of an initiative than they were 20 years ago.”
Retirees, who tend to be more confident than workers, are also feeling good about their prospects, with 37 percent expressing confidence to have a secure retirement, up from 18 percent in 2013 and 27 percent in 2014.
What’s gotten better since the aftermath of the Great Recession for both retirees and workers is that debt levels have fallen. Some 51 percent of workers say they have a problem with their debt levels, down from 58 percent in 2014. Among retirees, the debt concern has fallen to 31 percent, down from 44 percent in 2014.
“It’s significant that fewer people report having a problem with debt than in the past few years,” says Mathew Greenwald of Greenwald & Associates, a market research firm that conducted the survey. “This could indicate progress in addressing this issue and suggests there’s more emphasis on debt reduction than on saving for retirement.”
Tell us below what your retirement plans are. Have you put your future in a good place?