People are feeling better about retirement than they were just a few years ago — although they’re still not as confident as they were back in the halcyon days of the 1990s, according to a recent survey by the Employee Benefit Research Institute. Today, almost 60 percent of American workers are confident that their preparations for retirement are adequate, compared to fewer than half during the great recession, but less than the 70 percent in the mid-1990s who figured they had enough resources to finance a comfortable lifestyle after they left work. By contrast, 24 percent of American workers are “not at all confident” that they are prepared for retirement, down modestly from 28 percent who held such a negative view in 2013.
Confidence in retirement has increased due to the improving economy, more employment opportunities and the booming financial markets. But the single most important reason confidence has improved is because of employer-based retirement programs.
Other than Social Security, the primary way workers save for retirement is through an employer-sponsored plan, such as a 401(k). Almost three quarters of employed people say they are offered a retirement plan, and over 80 percent of eligible employees sign up for their program.
Furthermore, workers who participate in employer-based plans say they are more likely to also save in other retirement accounts, such as an individual retirement account or personal investments. This partly reflects income levels: higher paid employees have more money to contribute to employer plans and save in their own individual accounts. But there’s another element involved. Saving can become a virtuous cycle. When people start saving for retirement, they begin to take control of their lives. And once they feel that pull of empowerment, they realize they can in large part determine their own future for themselves.
However, in spite of improved worker confidence — or maybe because of it — Americans are still not saving enough, and only a minority are taking sufficient steps to fully prepare for life after work. While three quarters of full-time employees report they are saving at least something for retirement, most of them calculate that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plan, is less than $25,000. The silver lining: older workers report higher amounts of investments. Some 60 percent of workers over age 45 have over $25,000 saved up and almost a quarter of these older workers report assets of at least $250,000.
Most people, regardless of age, admit that they could be saving more. Some 70 percent said it would be possible for them to save an extra $25 a week by giving up minor pleasures such as take-out dinners, lottery tickets, snacks and expensive specialty coffees.
So how much money do you need saved up for a comfortable retirement? About one in five workers thinks you need at least a million dollars. But most people figure on much less. They expect that their expenses will go down, and estimate they will be able to manage with no more than 70 percent of their preretirement income, which will come from Social Security, a pension, personal savings and working. About two thirds of Americans expect they will work for pay for at least some period of time after they retire, perhaps consulting for their old company or taking on a part-time job in retail or recreation.
Finally, most people admit they don’t spend enough time planning for retirement. While more than 60 percent of workers have thought about how they will spend their time in retirement, fewer than half have considered how much money they’ll need, or even estimated how much their Social Security benefit will be when they retire. And just one in six workers has developed a written financial plan for retirement.
Average Americans spend almost as much time planning for a two-week vacation as they do planning for their retirement, which may last as long as 20 or 30 years. So maybe the time to start planning is now. The sooner you start, the sooner you can retire. And the more you plan, the more control you have over your own future.
Tom Sightings blogs at Sightings at 60 .
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How to Boost Your Retirement Confidence originally appeared on usnews.com
