Having a Retirement Plan Trumps Having a Plan for Retirement
The 2015 Retirement Confidence Survey (RCS)
by the nonpartisan Employee Benefit Research Institute and Greenwald & Associates finds that the nation’s retirement confidence continues to rebound from the record lows experienced between 2009 and 2013 — but exclusively among those who, directly or via their spouse, have a retirement plan, such as a DC plan, DB plan or IRA. More than four-in-ten (44%) of those without a plan are not at all confident about their retirement prospects, compared with just 14% of those who have a plan.
Not that the confidence levels are sweeping — only 22% are now very confident (up from 13% in 2013 and 18% in 2014), while another 36% are somewhat confident.
Moreover, that confidence may not be based on reality: Fewer than half (48%) of workers report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement, a level that has held relatively steady over the past decade.
The likelihood of trying to do a retirement savings needs calculation increases with household income, education and financial assets. In addition, workers reporting they or their spouse have a DC or DB plan or IRA are twice as likely as those who do not have such a plan to have tried a calculation (60% vs. 23%). Despite higher savings goals, workers who have done a retirement savings needs calculation are more likely to feel very confident about affording a comfortable retirement (33% vs. 12% who have not done a calculation).
Those calculations, however, are of varying sophistication: Nearly one-in-four (39%) guess at how much they will need, while 26% do their own estimate. Only 22% asked a financial advisor; 10% used an online calculator; and reading or hearing about how much is needed was cited by 10%.
Worker households with a retirement plan, such as a DC or DB plan or IRA, are more likely than those without such plans to report having saved for retirement (90% vs. 20%). The majority of those who indicate they and their spouse do not have a retirement plan (DC, DB or IRA) say their assets total less than $1,000, compared with approximately 1 in 10 those who have a plan (64% vs. 9%).
Almost two-thirds (63%) of those with money in an employer plan also report they or their spouse have money invested in an IRA (which may have originated as a rollover from an employment-based plan), and 49% say they have retirement savings in addition to money in their employer’s plan and an IRA.
While workers of today are more likely than workers 20 years ago to report they have saved for retirement (67%, up from 58%), statistically they are just as likely to have saved for retirement in 2005 as in 2015. Workers age 55 or older are more likely to indicate they have saved money for retirement (78%, up from 63% in 1995).
Workers of all ages appear to be planning to retire later, on average, than similarly aged workers were in 1995 and 2005. In particular, the percentages planning to retire at age 66 or older has increased significantly for every age group. In the age 55 and older cohort, 46% now expect to retire at 66 or older and 11% say they will never retire, compared with 24% and 8%, respectively, that had those expectations a decade ago.
All in all, more than half (56%) of workers expect to be able to manage in retirement with no more than 70% of their preretirement income, while another 23% expect to be able to manage with 70%-85%. Just 16% of workers say they will need an income replacement ratio in retirement of at least 85%.
Those estimates mirror current retiree realities: 57% of retirees say their income in retirement is no more than 70% of their preretirement income; 12% say it is 70%-85%, and 12% say it is at least 85%. On the other hand, nearly one-in-five (19%) of retirees were unable to estimate their replacement ratio (as were 5% of workers).
Unmarried men (57%) are more likely than unmarried women (45%) to report having saved for retirement, though married workers were much more likely to be savers, with 8 in 10 having saved for retirement. Unmarried women were more than twice as likely as married workers to have less than $1,000 in total household savings and investments, and married workers were far more likely than either unmarried women or unmarried men to report having accumulated at least $250,000.
Unmarried men were more likely than unmarried women (43% versus 28%) to have tried to calculate how much they will need to have saved by the time they retire so that they can live comfortably in retirement. Married workers (58 %) were more likely to have performed that calculation at a household level than unmarried workers of either gender. Married workers are also more likely than unmarried workers of either gender to report having taken other steps to plan for retirement at a household level, including:
- estimating how much monthly income is needed: 53% (38% of single men and 32% of single women);
- talking with a professional financial advisor about retirement planning: 43% (26% of single men and 25% of single women);
- calculating how much will likely be needed to cover health expenses in retirement: 31% (18% of single men and 16% of single women); and
- preparing a formal, written financial plan for retirement: 20% (14% of single men and 8% of single women).
Statistically, there are no differences in the age at which workers plan to retire by gender, with both groups having a median expected retirement age of 65. Despite their longer life expectancy, women are statistically as likely as men to think they are very likely to live until age 85, though they are somewhat more likely to say they will live until age 95 (29% of women vs. 22% of men).
Unmarried workers are more likely than their married counterparts to say they are very or somewhat interested in purchasing an insurance product with a portion of their savings that begins providing guaranteed monthly income at some point in the future, such as age 80 or 85. Unmarried women are most likely to say they are interested (55%), followed by unmarried men (40%). Married workers were least likely to express interest (30%).