More Americans are optimistic about their chances of being financially secure in old age, according to the latest annual retirement confidence survey from the Employee Benefit Research Institute (EBRI). Specifically, 17 percent of surveyed U.S. workers said that they are “very confident” they will have enough money to retire comfortably, and 47 percent reported they are at least “somewhat confident.” At a combined 64 percent that matches the highest level of reported retirement confidence since 2004. As for current retirees, three-quarters of respondents said that they are very or somewhat confident about being able to maintain a comfortable standard of living in old age.
That is a slight decline from the record high hit in 2017 and due mainly to more pessimistic views of Social Security and Medicare’s long-term viability. Overall, though, both workers and retirees continue to report levels of financial confidence that are much higher than what was seen during the “Great Recession.” Such improvements are likely a side effect to the significant recovery that occurred in both the economy and the stock market over the past decade. However, the report also highlighted that there is a strong correlation between old-age financial confidence and participation in a workplace retirement plan. For example, 76 percent of surveyed workers who reported that they or their spouse have money in an employer-provided defined contribution (DC) plan said that they are confident about achieving a comfortable retirement, compared to just 46 percent for workers not currently participating in such a plan.
It also makes sense that individuals with a workplace retirement plan have driven the gains in confidence seen during the past few years since an improving economy and a tightening labor market enable more job seekers to find employment opportunities that offer these valuable benefits. Further, a record-high 53 percent of workers said that they expect their employer-provided retirement plan to be a major source of income in old age. At the same time, only 24 percent of current retirees said that their workplace plan has been a major source of income. That big gap is likely a reflection of the continued shift from defined benefit pension plans to DC plans, and perhaps also a sign that more working Americans recognize the growing role of self-funding in achieving a comfortable and financially secure retirement. Unsurprisingly, 73 percent of employees indicated that access to a retirement savings plan is “extremely or very important in determining whether to stay in or switch jobs.”
Sources: Employee Benefit Research InstitutePost author: Charles Couch