The number of today’s workers who feel confident about having enough money to live comfortably in retirement is declining, with concerns about the cost of living and the future of Social Security and Medicare weighing on their confidence. Those are among the key findings from the Employee Benefit Research Institute’s (EBRI) 36th annual Retirement Confidence Survey.
Confidence Slips
Some 61% of today’s workers and 73% of today’s retirees feel somewhat or very confident about their retirement-related finances. For workers, that’s six percentage points lower than last year; for retirees, that’s five points lower.
How confident one feels about their retirement-related financial wherewithal is heavily influenced by a mix of internal and external factors — those within their control and those outside of their control.
Internal factors
Many of today’s workers and retirees readily acknowledge that their household balance sheets are not as strong as they should be. Less than 40% of workers and only about 50% of retirees describe their overall household financial well-being as “very good.” Both measures were lower this year than last. Many say they do not have sufficient emergency savings. When it comes to retirement savings, 42% of today’s oldest workers — those age 55 or older — have less than $250,000 set aside for their later years.
External factors
Large numbers of today’s workers and retirees also have concerns about possible cuts to Social Security benefits, increases in the cost of Medicare, and increases in the overall cost of living. Fewer than half of today’s retirees rate their standard of living as “very good” or “excellent,” with many describing the costs of health care and the overall cost of living as larger than expected.
An expectations/reality gap
Among today’s workers, the go-to solutions for all of this appear to be working past the traditional retirement age and then continuing to earn some income in retirement. However, as has been true in the past, the latest EBRI survey indicates that those may be unrealistic expectations.
For example, 39% of today’s workers expect to retire at age 70 or later, or to never retire — up sharply from 30% last year. The plan to work late into life is especially prevalent among today’s older workers. Among those age 45 to 64, 56% expect to retire at age 70 or older, or to never retire. In reality, that’s been the experience of just 10% of today’s retirees.
Among those who are now retired, 46% left the workforce earlier than planned (up from 40% last year), mostly for reasons outside of their control, such as health issues for themselves or a loved one or a change at their employer. As SMI has long suggested, it can be wise to plan to work past the typical retirement age, but it can be unwise to count on it.
As for finding paid work in retirement, while 74% of today’s workers have that expectation, just 31% of today’s retirees have actually worked for pay in their later years.
The weight of debt
One retirement-related hindrance impacting many of today’s workers is debt. Some 65% say debt is either a minor or major problem for them. Not surprisingly, workers who say debt is a major problem report far lower levels of retirement confidence than those for whom debt is not a problem.
While the survey didn’t break down debt into specific types, other research has pointed to an increase in the number of people bringing mortgage debt into their later years. For example, according to the Harvard Joint Center for Housing Studies, between 1989 and 2022, the share of homeowners 65 to 79 with a mortgage increased from 24 to 41 percent. As SMI has recommended before, it’s wise to plan to retire your mortgage at least by the time you plan to retire.
An important step
One relatively simple step today’s workers could take to better prepare for their later years is to estimate how much money they may need to have saved by the time they retire. Just 51% of today’s workers have done so — down a few percentage points from last year.
SMI premium members have a uniquely powerful planning tool at their disposal — MoneyGuide. For a one-time fee of just $50, you can avail yourself of this tool that financial advisors consider the gold standard among retirement planning software programs. With MoneyGuide, you can more accurately gauge your retirement preparedness and run your plan against various what-if scenarios.
Having a well-thought-out plan that objectively evaluates your situation and shows you how to improve it will do wonders for your retirement preparedness and peace of mind.
