Are You Confident About a Financially Secure Retirement?

There’s good news and bad news on the retirement front. The good news: Nearly two-thirds of workers and retirees are confident that they will have enough money to live comfortably throughout their retirement years. The bad news: that level of confidence is far below what it was just one year ago.

There’s good news and bad news on the retirement front. The good news: Nearly two-thirds of workers and retirees are confident that they will have enough money to live comfortably throughout their retirement years.

The bad news: that level of confidence is far below what it was just one year ago.

Retirement Worries are Prevalent

The long-running annual survey by the Employee Benefits Research Institute (EBRI) found that both workers and current retirees are very worried about what the impact of inflation, a volatile stock market, and rising interest rates will have on their ability to pay the bills during their retirement years.  Other factors, including rising housing costs, high mortgage rates, and the possibility of a recession, are adding to their anxiety.

The ERBI survey shows that 64 percent of respondents feel at least somewhat confident about a secure retirement this year, down from 73 percent in 2022. That’s the sharpest one-year drop since the financial crisis of 2008-09. The confidence level was 82 percent as recently as 2019.

ERBI is a non-profit that has published the annual retirement survey for 33 consecutive years.

Inflation is especially worrisome. Half of retirees say their overall spending is higher than expected – a sharp increase from a year ago. ERBI says 58 percent of retirees and 73 percent of workers are concerned that they will have to make substantial cuts to their spending due to inflation.

The survey breaks down the myriad results among people already retired and those still in the workforce, looking with increasing trepidation at what their retirement years will look like. Interestingly, people who are already retired and have fewer options and opportunities to change their situations are more confident than the younger cohort. That’s been pretty constant over the years because there’s a higher level of uncertainty about retirement the further away it is.

Rising Debt Provokes Anxiety

Another factor weighing on workers right now is their rising level of debt. Sixty-two percent of workers said debt is a problem. That’s up from 56 percent a year ago. Among retirees, only 25 percent cite debt as a major concern. Over the years, the survey has consistently found a relationship between debt levels and retirement confidence.

A separate report from Lending Tree, an online lender, shows Americans’ credit card debt is at an all-time high, approaching $1 trillion.

ERBI also says workers who participate in a retirement program such as an IRA or a defined benefit plan are “remarkably more confident” than their counterparts who do not have a real plan.

Other ERBI Survey Findings

  • There’s a big gap between when active workers expect to retire and when retirees say they actually did. Workers say they expect to retire at age 65. But in reality, retirees report they stopped working at a median age of 62. This is often due to an unexpected hardship, such as health problems or a job loss.
  • Nearly 3 out of 4 workers say they plan to do some kind of for-pay work once they retire from their current careers. However, just 30 percent of current retirees say they have actually done so.
  • The retirement savings of Americans took a major hit last year as both the stock and bond markets tumbled. The S&P 500 tumbled more than 19 percent in 2022.
  • Workers’ confidence in Medicare took a significant hit. Just over half feel at least somewhat confident that it will continue to provide benefits at today’s levels.

A recent report from the Federal Reserve noted the average savings needed for one person to live comfortably in retirement is $967,000. Contrast that with the average retirement account balance of just $144,000.

Overall, confidence in retirement is still relatively high, but there are plenty of legitimate concerns that could keep many people from feeling secure about their future prospects. The good news, especially for workers, is that you still have time to improve that outlook.

Feel free to contact a wealth advisor at EKS Associates if you are interested in discussing your retirement plan.

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