Do employees feel that they are ready for retirement? Yes. Do the numbers back this up? A new survey from the Employee Benefit Research Institute (EBRI) says no.
While the highest percentage of employees in the history of the survey (21%) feeling ‘very confident’ that they and their spouses have saved enough for retirement, combined with nearly half of employees feeling ‘somewhat confident,’ this marks a high water mark for employees.
However, according to the survey, the numbers do not add up, as highlighted in a recent Employee Benefits News blog post. Two-thirds of workers without a retirement plan have less than $1,000 in retirement savings, while another 16% have between $1,000 and $10,000 saved.
As many workers do have some form of defined contribution or defined benefit retirement plan, there is a dangerous amount of employees with no form of savings—31 percent of respondents have virtually no savings or investments, according to the report.
“There is a clear dichotomy between those who have some sort of retirement plan — that is, a defined benefit or defined contribution plan, or individual retirement account — and those who do not,” says Craig Copeland, senior research associate at EBRI. “Those with a retirement plan are more likely to be very confident about their financial prospects in retirement, compared with those who do not have a retirement plan.”
Those without a retirement plan are facing a challenge, with many expecting to wait until at least age 70 before retirement.
They may be confident, but “the amount of money that American workers have saved is alarmingly low,” says Matthew Greenwald of Greenwald & Associates, the company that conducted the survey. “A little over half, 54%, have less than $25,000 in savings and investments.”
Greenwald recommends employees begin to take corrective action regarding their own personal finances, and stop focusing on events in the macro economy, offering the following tips:
- Budget Better: “When workers are not saving as much as they themselves think they should, what explains the shortfall in saving? The main reason given is day-to-day expenses,” he says. “If saving for retirement is important, it should be that better budgeting could often permit greater saving.”
- Find Out How Much You’ll Need: There are numerous ways people can do the calculation, including speaking to a financial adviser, using an online retirement calculator or doing the math on a worksheet.
- Seek Advice: Most retirement industry experts agree that workers who seek out advice about retirement do a better job of saving for retirement. There is a trend toward so-called robo-advisers, systems people can log into that will give them advice based on how they answer a few financial questions.
For more information, see the EBN Article, Employees’ retirement confidence grows, but savings still ‘alarmingly low’