A new survey by the Employee Benefits Research Institute shows that worker’s confidence in their retirement plans in the beginning of 2014 has recovered from some of that record lows seen during the past five years, although frankly that confidence is limited mostly to people who are higher earners and have 401(k)s and IRAs.
Unfortunately, confidence overall is still quite low and only 18% of American workers are now “very confident” that when retirement comes they will have enough money. That’s up from 13% in 2013 but still isn’t very promising. The survey also showed that 37% of workers are “somewhat confident” but that 24% of American workers are “not at all confident”.
Top earners had the highest confidence, unsurprisingly, and those with $75,000 or more in income per year were more than twice as likely to say that they were “very confident” about being able to retire comfortably than those with incomes between $35,000 and $74,000 a year. In another finding that was also less than surprising, only 7% of workers that made $35,000 a year or less were “very confident”.
The survey showed that workers with retirement plans were also more confident about retiring and were more than twice as likely to report their confidence being high than workers who have no IRA, 401(k) or other retirement fund working for them. The survey showed that workers who did have a retirement plan of some sort were 24% more likely to say that they were very confident about retirement while only 9% of those without an IRA or 401(k) responded the same way.
While there was a bit of a recovery in terms of retirement confidence, according to Ed Slott, the founder of IRAHelp.com, that confidence “is absolutely because of the stock market.” Slott is also the author of “The Retirement Savings Time Bomb and How To Diffuse It” and says that “It’s a false confidence, which is more devastating than anything. Many workers have the same habits as they did after the 2008 crisis.”
Those habits, unfortunately, often do not include any type of financial planning. The survey found that even though many workers and their spouses had a retirement plan in place, most don’t spend very much time calculating the exact dollar amount that they’ll actually need in order to retire, or plan how to invest their money to grow their “nest egg”.
Indeed, financial services provider TIAA-CREF surveyed Americans recently and found that most spend more time choosing a restaurant, tablet computer or flatscreen TV then they do planning for their retirement. They also found that, between the ages of 18 to 34, more than one third of the people they surveyed had no real understanding of what an IRA is and also did not know the difference between an employer-sponsored plan and an IRA.
If you’re one of the people who fall into the “no plan for retirement” category, and you’re feeling a little anxious, drop us a note or give us a call and we’ll answer any questions for you that we can as well as give you some excellent financial planning advice.