EBRI: Uncertain Times Leave Participants Less Sure

May 9, 2001 (PLANSPONSOR.com) - In the wake of slipping markets and a precarious economy, American workers seem less confident about the prospects for a comfortable retirement and less involved in planning for that event, according to new research from the Employee Benefit Research Institute (EBRI).

In a report to be released tomorrow, the eleventh annual Retirement Confidence Survey (RCS) found:

  • 63% of workers are very or somewhat confident of having enough money for a comfortable retirement, down from 72% in the 2000 survey;
  • 70% of workers are confident that they are doing a good job of preparing for retirement, down from 77% last year;
  • 78% are confident in having enough money to pay for basic expenses during retirement, compared with 78% a year ago.

At the same time,

  • 60% now say they are “behind schedule” in planning and saving for retirement, versus 54% last year
  • 17% of workers are now “not at all” confident of having enough money for retirement – nearly twice as many as the 10% cited in the 2000 study

just 58% of workers are confident about having enough for medical expenses, and just 44% share that confidence regarding long-term care, compared with prior year findings of 66% and 51%, respectively

The study’s authors note that while roughly two-thirds of respondents have been “somewhat confident” for several years now, that was generally predicated on an understanding that everything goes as expected. 

Fluctuations in the market and workplace uncertainties may well have undermined that confidence.

More to Lose?

The study also notes that retirement confidence is more likely to have fallen among those aged 35 – 54 than among older or younger workers, and among those with household incomes of $35,000 to $75,000.

And yet, last year’s political debates on pension and social security reform appears to have bolstered confidence in the government “safety nets”. 

Over a third (34%) of workers say they are confident that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today, up from 19% in 1995 and 28% a year ago.  An even larger number (39%) have that confidence in Medicare, up from 21% in 1995. 

Of course, those totals are far short of a majority.  And it is perhaps not surprising to find that while nearly 60% of those over age 55 are confident about Social Security’s “promise”, just 22% of those between 25 and 34 share that sentiment.

Ignorance is Bliss?

Last year more than half (51%) had made an attempt to determine how much they would need in retirement according to the RCS.  However, that number slid to 46% this year – and when pushed on the details of that determination, the number fell to 39%.

Interestingly, the 2001 EBRI data found that the decrease in retirement confidence has generally been steeper among those who have tried to do a calculation than among those who have not, particularly with respect to medical expenses and long-term care.

Half of workers report that an employer contributed money to a retirement account in their (or their spouse’s) name last year, and two-thirds have an opportunity to contribute to that plan on a pre-tax basis.  Of those, more than three-fourths (76%) are contributing, and that amount was:

  • 31% – the most they could afford
  • 17% – the maximum matched by their employer
  • 11% – the maximum allowed by the plan
  • 9% – the point at which the match declined
  • 4% – the amount at which they were automatically enrolled
  • 4% – the maximum allowed by law
  • 4% – it was a guess
  • 4% – based on a percentage of earnings

  • Those who don’t contribute most often said they couldn’t afford it (29%), or they were ineligible for the plan (20%).

A Failure To…
Only about a third of workers (35%) said their employer has provided educational material or seminars about retirement planning in the past 12 months, a decline from 1999’s 41% high mark. 

The study’s authors note the expanded use of online education (47% in 2001 versus 4% in 1998), and suggest that the medium itself may be less visible than traditional means of communication.

Workers that received materials were more likely to:

  • have done a needs calculation (53% versus 32%)
  • have made changes as a result of the calculation (66% versus 37%)
  • have personally saved for retirement (86% versus 55%)
  • be currently saving for retirement (82% compared with 50%)
  • automatically save a predetermined amount (77% compared with 53%)

The RCS was co-sponsored by the Employee Benefit Research Institute (EBRI), the American Savings Education Council (ASEC), and Mathew Greenwald & Associates, Inc., a Washington, DC-based market research firm.