Retirement confidence remains at historic lows, according to the Employee Benefit Research Institute's 2013 Retirement Confidence Survey, with 28 percent of respondents saying they are not confident in their ability to retire.
That number has essentially stayed the same since 2011. Only 13 percent of respondents said they were confident and 38 percent said they are somewhat confident they will be able to retire comfortably.
Co-sponsored by the Principal Financial Group, the annual survey looks at how much people are saving for retirement, whether they have sought the advice of a financial expert in their planning and what they think they will need to retire comfortably. This year's survey also asked if they would reduce the amount of money they set aside in an employer-sponsored plan if Congress took away tax incentives.
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One reason retirement confidence has remained low despite a brightening economic outlook may be that some workers may be waking up to a realization of just how much they need to save, according to the report. Asked how much they believe they will need to save to achieve a financially secure retirement, a striking number of workers cite large savings targets: 20 percent say they need to save between 20 and 29 percent of their income and 23 percent thought they needed to save 30 percent or more.
The most disturbing statistic from the survey was that 60 percent of workers in the study have saved less than $25,000 toward their retirement, said Greg Burrows, senior vice president of retirement and investor services for the Principal. More than one-third of respondents also said they planned to work into retirement, which doesn't correlate with current retirees' claims that they were not able to work past age 65 or they were forced to leave the workforce early due to health problems.
Despite the negatives that came out of this study, there were some overall positives, Burrows said.
"While confidence is low and savings is low, we see a more realistic perspective on what savings rates should be," said Burrows. Nearly 70 percent of individuals said they need to set aside 10 percent of their household income annually to build a retirement nest egg, which "matches up with the work we've done," he said.
As Congress debates where it should make cuts to reduce the growing national debt, eliminating tax incentives for defined contribution retirement plans has been put on the table.
Nearly half of survey respondents said that they would reduce contributions to their 401(k) plan or stop saving entirely if tax incentives were eliminated.
"There is a very clear linkage between savings rates and tax incentives," Burrows said. "It is very important in this time when we talk about tax reform to make sure we have a really good understanding of the linkage tied to tax incentives."
Survey respondents who said they were the most confident were also the most likely to seek the help of a financial advisor or to use online planning tools like retirement savings calculators.
"The basic message for those with a low confidence level is to start to take action," Burrows said. "You can take action by using calculators or planning tools or putting together a plan for yourself. Focus on savings and spending."
He added that once an individual has a plan in place they should stick with it and do it as consistently as they can over their working career.
Individuals with a retirement plan in place were 20 to 40 percent more confident in their ability to retire than those without, he said.
Another interesting outcome of the EBRI survey was that a high percentage of individuals thought they needed to save more money than they actually do to achieve a comfortable retirement.
"What fueled that is less than 25 percent of people have used planning tools or calculators to understand what they need," Burrows said. "Individuals are realizing that savings rates need to be higher and some individuals have a more unrealistic perspective of how much that needs to be because they haven't utilized the tools available or taken the opportunity to understand their personal situation."
Only 46 percent of respondents reported that they or their spouse have tried to calculate how much money they will need to have saved by the time they retire so they can live comfortably in retirement.
More immediate financial needs have taken a front seat to retirement savings since the Recession began in 2007. Only 2 percent of workers and 4 percent of retirees identified saving or planning for retirement as the most pressing financial issue they face. Both groups are more likely to identify job uncertainty and making ends meet as their top financial worries.
The individuals who said they haven't saved enough for retirement cite cost of living and day-to-day expenses as the top reasons they don't contribute or don't contribute enough to their employer's plan, with 41 percent of respondents citing this factor.
More than half of those surveyed said they have a problem with debt and only half of them said they could definitely come up with $2,000 if an unexpected need arose within the next month.
Although the economy is still challenging for many, retirement account balances have "recovered quite well over the past couple of years," Burrows said. "We are seeing improvements in the economy and account balances, but we are not seeing improvements in confidence levels. That strikes me as a little bit surprising."
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