By FPA member Jason K. Branning, CFP®
Last Updated: April 18, 2011
The Employee Benefit Research Institute (EBRI): 2011 Retirement Confidence Survey (RCS) was released in mid-March.1 The RCS found waning confidence about retirement among those surveyed. Twenty-seven percent of workers indicated that they are “not at all confident” about a comfortable retirement. This stat is a new 21 year low and reflects a shift toward a new normal in workers’ perceptions about retirement.
Realism in Shifting Attitudes
While future retiree expectations seem more pessimistic, many view this as a positive aspect of the survey. “People are increasingly recognizing the level of savings realistically needed for a comfortable retirement. We know from previous surveys that far too many people had false confidence in the past,” stated Jack vanDerhei, EBRI research director and co-author of the report. Stock market gyrations over the last few years, coupled with rising health and long-term care costs, have re-oriented retirement expectations of the amount of workers need to have saved.
There are various options to saving more for retirement, including increasing savings rates, working longer, or significantly reducing expenses ahead of retirement. However, survey co-author Mathew Greenwald, of Greenwald & Associates points out that the survey revealed how workers plan to get to the goal of a comfortable retirement, “Many people are planning to work longer and retire later because they know they simply can’t afford to leave the work place — both for the paycheck and for the benefits.”
Workers are compelled by a steady paycheck and other benefits that employers provide. They also seem inclined to embrace the stability of the familiar as a default, rather than selecting from the other options.
Those surveyed seemed to leave the default position of working longer open to the possibility of change with more specific advice. Retirees want more information about the affects of making different choices and want guidance. The advice that nearly all participants in an employer-sponsored retirement plan say would be valuable include:2
- How much should they save to keep their current lifestyle once retired (91 percent)
- How much income they could expect from their current retirement savings balances (91 percent)
- How much retirement income can they expect based on their current savings rates combined with what they already have saved (89 percent)
The RCS revealed that only 23 percent of workers and retirees have obtained investment advice from a professional financial adviser. If you are nearing retirement and have questions, contact a qualified financial adviser to assist you in answering these three questions, as well as others related to your situation.
1 The 21st annual RCS is conducted by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Inc. It is the longest-running annual retirement survey of its kind in the nation. Full results of the 2011 RCS are published in the March 2011 EBRI Issue Brief and online at www.ebri.org.
2 Advice on these three questions would be valuable assuming certain assumptions. (EBRI RCS 2011 p. 26)
FPA member Jason Branning, CFP®, is a fee-based investment adviser and financial planner with CS Planning Corp. in Ridgeland, Miss. He owns Branning Wealth Management LLC and serves on FPA’s Journal of Financial Planning Advisory Review Board.