Tough Economic Conditions Bring Big Drop in Retirement Confidence

May 1, 2023
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Today's workers and retirees are feeling far less confident than last year that they will have enough money to live comfortably throughout retirement. That’s the lead finding from The Employee Benefit Research Institute’s (EBRI) 33rd annual Retirement Confidence Survey. Some 64% of respondents reported feeling somewhat or very confident about their retirement funding — down sharply from last year’s 73%. That's the biggest hit to retirement confidence since the Great Financial Crisis of 2008.

Not surprisingly, the biggest concern weighing on people’s minds is inflation, with 84% of today’s workers and 67% of retirees saying the increased cost of living is making it more difficult to save money. Large numbers from both groups say inflation is causing them to make substantial cuts to their spending. 

As for their actual preparedness, 44% of workers age 55 or older have less than $250,000 saved for retirement.

The weight of debt

Debt is another issue weighing on people's minds. Some 62% of workers say debt is a problem for them (up from 56% last year). Those figures are much lower for retirees, with 34% saying debt is a problem for them (about the same as last year).

While the survey didn’t break debt down into specific types, other surveys have pointed to an increase in the number of people bringing a mortgage into their later years. As we have recommended before, it’s wise to plan to retire your mortgage by the time you retire. And if you plan to refinance, be careful about resetting the 30-year payoff clock to a date that’s past your intended retirement age.

One other area of vulnerability: Just 44% of today's workers have planned for how they would cover an emergency or big expense in retirement.

A little knowledge could go a long way

Several questions on the survey highlighted where an investment in financial education could be very beneficial. For example, while target-date funds (TDFs) have become the default investment choice in many workplace retirement plans, 40% of this year’s survey respondents said they do not understand how such funds work.

As we’ve written before, different companies that offer target-date funds design their funds with different asset allocations — even for funds that carry the same target retirement date. Such funds are only becoming more complex with the introduction of TDFs that have annuities baked into their design.

Many survey respondents acknowledged not knowing where to go for financial or retirement planning advice. Asked where they do go for such counsel, the most popular answer, at 40%, was family or friends.

Similar to past surveys, just 51% of today’s workers have taken the time to estimate how much money they are likely to need to have saved by the time they retire.

A consistent story

As has been true in the past, the latest EBRI Retirement Confidence survey shows a couple of important areas of disconnect between today’s workers and today’s retirees. For example, whereas 73% of today’s workers believe they will work for pay to some degree in retirement (up from 70% last year), only 30% of today’s retirees have actually done so. 

While some 68% of workers expect to retire at age 65 or later, only 32% of today’s retirees waited that long. More specifically, 33% of today’s workers expect to retire at age 70 or never, whereas that was true for just 6% of today’s retirees.

Importantly, 46% of today’s retirees said they left the workforce earlier than planned, often for reasons that were outside of their control, such as health issues for themselves or a loved one or a company downsizing.

One takeaway? Use retirement planning software, such as MoneyGuide, to run some numbers on your retirement. And when you do, base your calculations on a retirement age that’s a bit younger than your true intended retirement age. Having a well-thought-out plan will do wonders for your retirement preparedness and peace of mind.

To read more about the survey results, click here.

Written by

Matt Bell

Matt Bell

Matt Bell is Sound Mind Investing's Managing Editor. He is the author of five biblical money management books and the teacher or co-teacher on three video-based small group resources. His latest book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, was published by Focus on the Family in 2023. Matt has spoken at churches, universities, and conferences throughout the country and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

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