The 2016 retirement confidence survey and the changing state of retirement


Be prepared to retire earlier than you currently expect. Open a retirement account, such as a 401(k), IRA, or defined contribution plan, and contribute to it regularly. Create a realistic retirement plan, for both your retirement finances and your lifestyle. Work with a financial advisor.

These are some of the takeaways from the newly released 2016 Retirement Confidence Survey prepared by the Employee Benefit Research Institute (EBRI) and Greenwald and Associates. The survey, now in its 26th year, is the longest-running annual retirement survey of its kind in the nation. It never fails to hold useful insights for retirees and pre-retirees of various ages.

Only 21% of workers overall in the 2016 survey indicated they were “very confident” they’ll have enough money to retire comfortably. This figure has remained mostly unchanged for the last 26 years, even though more financial education is readily available today.

Those who had the highest levels of confidence had taken concrete steps to prepare for retirement such as creating a financial plan, working with an advisor, and giving some thought to what their retirement lifestyle and activities would be.

Additionally, workers who reported that they or their spouse had a personal retirement account or retirement benefits at work were twice as likely to be very confident about a comfortable retirement (26% compared to 10%). The proportion of workers with a retirement account or benefits who are very confident has increased greatly, from 14% in 2013 to 26% in 2016. By contrast, the percent of workers who do not have retirement accounts and are very confident remains at around 10%.

The report also underscores the importance of retirement planning. Workers who have no plan are more than three times as likely to report they are not at all confident about their financial security in retirement (38% without a plan vs. 11% with a plan).

There was also a correlation between retirement planning and the amount saved. Sixty-nine percent of workers report they or their spouses have saved for retirement. The majority of those who do not save for retirement are those who do not have a retirement plan. Among respondents who did not have a retirement plan and provided this information, 83% reported that the total value of their household’s savings and investments, excluding the value of their primary home and any defined-benefit plans, was less than $10,000. On the other hand, 35% of workers with a retirement plan said their value of these assets is $100,000 or more.

The study found many workers continue to be unaware of how much they need to save for retirement: less than half (48%) of workers reported they or their spouse had ever tried to calculate how much money they will need to live comfortably in retirement.

But doing such a calculation appears to build confidence. According to the report, 31% of those who have tried to figure out how much money they will need to have saved for retirement are very confident in a comfortable retirement, but only 13% of those who have not worked through these numbers are very confident.

The survey respondents also exemplified the savings gap among Americans in general. Most Americans believe they have not saved enough for a comfortable retirement. The average contribution rate to 401(k) plans is 8%, according to Bloomberg. But according to the EBRI report, 17% of workers say they need to save between 20 and 29% of their income and another 22% indicate they need to save 30% or more, while 38% of workers think they need to save less than 20% of their income. Another 22% say they do not know how much they should be saving.

The survey indicated the value that workers place on workplace retirement plans. Those with access to a 401(k) or similar plan save on average three times more than those without access to workplace plans.

To make up a savings shortfall, many plan to continue to work. Replying to the question, “What do you think the impact will be of currently saving less than you need for retirement?,” 15% said they would work in retirement, and 14% said they would retire later. The percentage of workers who expect to retire after age 65 has increased, from 11% in 1991 to 37% in 2016

But 46% of retirees in 2016 had actually retired earlier than expected.  Some  were downsized, while others left the workforce for health reasons or to care for a spouse or family member. Only 44% retired when they had planned, and only 4% retired later than planned.  Just 15% of retirees in 2016 said they said they actually retired after age 65.

Debts have a significant impact on workers’ confidence. In the survey, just 9% of workers who indicated their debt was a major problem said they were very confident about having enough money to live comfortably throughout retirement, versus 32% of workers who indicate debt was not a problem. Fifty percent of workers with a major debt problem are not at all confident about having enough money for a comfortable retirement, compared with 12% of workers without a debt problem.

Among retirees themselves, 38% indicated their expenses were higher than expected, compared to 21% who said they were lower and 38% who said they were about the same as expected. Those who reported a problem with debt were more likely to say their expenses were higher than expected than those who did not have a debt problem. Among those who said that their expenses were higher than expected, 42% compensated by reducing other spending, 18% say they adjusted their budget, adapted, managed, and/or lived within their means, and 10 percent say they took out money from their savings and investments.


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