Tag Archives: Retirement Confidence Survey

America’s scary retirement numbers

nest egg

For 22 years, the Employee Benefit Research Institute (EBRI), a private, nonprofit, nonpartisan public policy research organization, has undertaken an annual Retirement Confidence Survey (RCS), the longest running retirement survey of its kind in America. The survey seeks to gauge the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues.

In March 2012, EBRI published the findings of its 22nd retirement survey. Before we look at the findings, we need a benchmark to access and evaluate the findings — namely how much money we need for a reasonably secure retirement. The consensus of financial advisors is that the average recommended savings is about 8 to 10 times your final annual salary. The figure, by some estimates, is around $1 million.

The bad news is that the EBRI retirement survey found that the vast majority of Americans are underprepared for retirement, with just 14% of us who feel very confident that we will have enough money to live comfortably in retirement. There is more bad news still:

  • Only 58% of Americans are saving for retirement, which means nearly 1 out of 2 Americans (42%) are not! — although we know full well that Social Security (if it’s still there when you retire) was not meant to be and will not meet all your retirement needs.
  • More than half of American workers (56%) are taking the ostrich approach. They have not even tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in their “golden years.”
  • Of the Americans who are saving for retirement, 60% have less than $25,000 put away, not including home equity or defined benefit plans. Even worse, a full 30% have less than $1,000. Only 10% have $250,000 or more.
  • Almost half (48%) of workers ages 45 and up have less than $25,000 saved.
  • Of the Americans who are saving for retirement, 34% said they have had to dip into their savings to pay for everyday expenses.
  • As one would expect, savings rates and the amount saved are strongly positively correlated to education, income, and health status. (Education, income, and health status are themselves positively correlated.) 93% of those making more than $75,000 are saving for retirement, whereas only 35% of those with income of $35,000 or less are saving.
  • Although 74% of all American workers are offered an employer-sponsored retirement savings plan (e.g., 401k), only 38% of all workers participate in such a plan, the majority of whom (81%) have accumulated savings and investments totaling at least $50,000.

Some other findings:

  • Many Americans feel insecure about their employment, with 42% identifying job uncertainty as the most pressing financial issue facing Americans today.
  • 22% of retirees said they’re taking more than they thought they would out of their accounts, depleting their savings faster than they had anticipated.
  • Since most Americans have not prepared for retirement, 22% are putting off retirement to a later date, while 7% say they don’t plan to retire at all and will continue to work. That, of course, may not be up to them (see below).
  • Half of  Americans who currently are retired say their retirement wasn’t planned, that is, they retired because they left the workforce unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure.

To read the EBRI survey report in PDF, click here.

The survey was conducted in January 2012 through 20-minute telephone interviews with 1,262 individuals (1,003 workers and 259 retirees) age 25 and older in the United States, using random digit dialing along with a cell phone supplement to obtain a representative cross section of the U.S. population. The survey has a statistical precision of plus or minus 3 percentage points.

H/t ZeroHedge

~Eowyn