Retirement Confidence is on the Rise

Retirement Confidence is on the Rise. The latest retirement confidence survey from the Employee Benefits Research Institute (EBRI) is out, and it found that workers are feeling optimistic about their ability to retire. Two-thirds of active workers are at least somewhat confident in their ability to retire securely, according to EBRI’s 28th Annual Retirement Confidence Survey (RCS). That’s up from last year, but still below the all-time high of 70% reported in 1999.

Recent strong equity market returns likely to play a role in lifting workers’ moods. Even still, some workers may be overstating their financial preparedness for retirement. The RCS shows that workers who demonstrate a high level of retirement confidence have generally taken steps to understand how much income they will need to live on in retirement. By contrast, those who haven’t taken the time to do the math on how much they’ll need for retirement tend to be pretty stressed.

BenefitsPro listed 10 takeaways from the latest EBRI Retirement Confidence Survey, a few of which we’ve highlighted here:

  • Retirement confidence and preparedness correlates with having access to a defined contribution (DC) retirement plan at work. Seventy-two percent of workers with access to a workplace DC plan said they were confident in their preparation vs. 42% of those who aren’t saving through employer-sponsored plans.
  • 26% of active workers have less than $1,000 saved for retirement.
  • Conversely, among workers and retirees that have access to a retirement plan, 30% have more than $250,000 saved.
  • Just 36% of survey respondents say they have attempted to actively calculate what they will need to have saved for retirement. That is down from 1999 when nearly half of the workers said they made such calculations — among the highest ever reported in the RCS survey.
  • Estimating retirement costs helps with confidence, even if the calculations aren’t accurate.
  • Employers shouldn’t be afraid to raise their plan’s default deferral rate — workers are amenable to it. Sixty percent of workers who aren’t currently saving in a plan said they would improve savings habits if defaulted into a plan at 3%. Fifty-three percent said they’d be somewhat likely to save more if their default was raised to 6%. While there was some pushback at 10%, 46% of respondents said they would save more at a 10% default rate.
  • Not all retirees are spending down their DC plan assets. Fewer than 44% of retirees with DC plan assets rolled them over at retirement. That may be because four in 10 report income from a defined benefit (DB) plan. However, that may not be a viable option for today’s workers, 80% of whom expect their DC plan to be their primary source of retirement income.
  • Three out of 10 workers say they don’t know what they will do with their DC savings at retirement. Three in 10 say they expect to roll some savings into an IRA; another one in four intend to leave at least some money in the plan. Twenty percent of workers said they plan to purchase a lifetime income option, however, just 7% of retirees say they have done so.

Plan sponsors can benefit from EBRI’s latest RCS findings to boost workers’ retirement confidence by helping them determine how much income they’ll need in retirement and improving the accuracy of those calculations, increasing default deferral rates when applicable and possible, and providing information about the options available to participants for accessing their savings at retirement and beyond.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
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