The Retirement Disconnect: Confidence Doesn’t Mirror Practices

Worried couple doing their accounts in the living room


There’s good news and bad news when it comes to retirement savings in America, according to the results of the 2014 Retirement Confidence Survey, which were recently released by the Employee Benefits Research Institute and Greenwald Associates.

The good news: The confidence of Americans in their ability to retire with financial security has rebounded somewhat after declining for seven consecutive years.

The bad news: Despite this increased confidence, Americans in general are no more likely to have saved any more money for retirement this year than they did last year.

Perception vs. Reality

According to the survey, 18 percent of workers now say they are “very confident” in their retirement financial security. This is up 5 percentage points from just 13 percent who voiced this level of retirement financial security last year.

“The reality, however, is that this is still fewer than one out of every five Americans,” comments Martin Walcoe, EVP of David Lerner Associates. “The flip side of that number is that 76 percent of Americans (or nearly four out of every five who have a retirement plan) are not very confident in their retirement financial security.”

The survey results with regard to how many Americans are actually saving money for retirement and how much they’re saving are much less encouraging. About one-third of workers (35 percent) say they haven’t saved anything yet for retirement, with only 57 percent saying they are actively saving for retirement.

And 36 percent of workers said that the total value of their retirement savings and investments (not including home equity or defined benefit pension plans) is less than $1,000. This is up from 29 percent last year who said their retirement savings total less than $1,000.

“Retirement savings remain disturbingly low,” noted Matthew Greenwald, the president of Greenwald & Associates. “And for some segments of the population, savings have actually gone down as the sluggish recovery continues to exact a toll on many.”

Making matters worse is ongoing concerns among many Americans about debt. One out of five workers (20 percent) say they have a major problem with debt, while another 38 percent say they have a minor debt problem. In other words, nearly six out of every 10 Americans believes they have a debt problem.

Why the Disconnect?

It’s logical to wonder why Americans’ retirement confidence has risen if their actual retirement behavior hasn’t changed. The authors of the report believe that one possible reason is the big rise in the stock market last year, as well as rising property values in many areas of the country.

“It appears that people make some assumptions about how financially secure they will be in the future based on how well the economy is performing now,” noted Greenwald. “With economic conditions being somewhat cyclical, this obviously is not a good way of making these judgments or predictions of the future.”

Another possible explanation is the significant rise in the number of Americans who say they plan to work later in life. Only half of workers (50 percent) now say they plan to retire at age 65 — this is down considerably from the 84 percent in 1991 who said they plan to retire at 65. Nearly one out of five (22 percent) workers today say they plan on working until at least age 70.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC


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