The Employee Benefit Research Institute (EBRI) has released its annual Retirement Confidence Survey (RCS). While there has been somewhat of an uptick over recent results, the overriding message is that most Americans are either not confident or are uncertain about having enough savings for a secure retirement. The 18% who are very confident about having a secure retirement is an improvement over last year's 13% figure. Another 24% indicated that they were not at all confident. Clearly, there is a lot of uncertainty out there. Other key points from the RCS:
How do we solve the confidence problem? While the RCS points out that there are some signs of improvement, I think that the bigger picture is that there is still a very long way to go for people to feel generally more optimistic. Debt and everyday expenses are on the minds of many. How can we talk to people about saving for the future when the present is its own challenge? Telling people that they need to save more for retirement is all well and good, but it doesn't get at more immediate needs. Creative ideas that will resolve both current and future challenges is what is needed.
0 Comments
Ameriprise Financial has released a report that quantifies what this blog suggested in our initial post - there is a disconnect between the desire to save more for retirement and the reality of doing so. Simply put, most people do have the desire to save for the long-term, but meeting short-term needs tends to take priority. The Ameriprise study focused on three demographic groups - Baby Boomers, Gen X, and Millenials. Here are some of the more interesting findings:
While the study's conclusion that today's trade-offs will boost future financial goals is true enough, I think the one additional focus that is needed is helping people better navigate the current challenges, especially when they do get in the way. Once upon a time, defined benefit plans were the retirement plan of choice for most employers. The defined contribution plan, primarily in the form of the 401(k) plan, resulted in a major shift toward participants taking more responsibility for their own retirement savings. Unfortunately, many individuals are not skilled investors, resulting in a widespread savings shortfall. Add other financial challenges to the mix and the challenge is even greater. With DB plans declining and DC plans producing inadequate savings, many have turned to Social Security as their primary, if not sole, source of income in retirement. AARP highlights some key Social Security data:
Social Security remains an important piece of the retirement puzzle. Ensuring its availability for future retirees should be top of mind for the foreseeable future. 2/18/2014 0 Comments Plan Activity Relatively CalmAccording to the Investment Company Institute (ICI), defined contribution (DC) plan activity remained stable for the most part through the first three quarters of 2013. Highlights include:
The ICI survey represents about 24 million accounts serviced by DC recordkeeping firms. 2/3/2014 0 Comments Elusive Retirement SecurityI live about half an hour from MetLife Stadium, where the Super Bowl was played in relatively balmy weather for early February. The worries about snow didn't materialize for the game. For those traveling today, it's quite a different story. Many schools in northern New Jersey are closed today due to another snowstorm. The game and the surrounding hype are a nice distraction from people's worries. Like the errant snap to start the game yesterday, many people are finding the concept of security in retirement elusive at best.
TIAA-CREF just released a study that shows retirement security is top of mind for nearly three-quarters of respondents. Forty percent (40%) name as their top retirement goal ensuring that their retirement savings are safe regardless of what happens in the stock market. Just over one-third (34%) name having sufficient guaranteed monthly income to cover living costs in retirement as the top priority. TIAA-CREF's survey highlights some key disconnects among participants:
An article in the New York Times today noted that many restaurants and retailers that focus on the middle market are struggling. The higher-end stores and value-centered stores are doing better. The findings from the TIAA-CREF survey are an indirect but logical extension of the challenges many middle-income families are trying to address, and something policy makers and legislators should consider. 1/10/2014 0 Comments Underestimating Retirement SavingsMuch of the typical data that looks at retirement savings focuses on the current employer. According to a report from Towers Watson, this may tend to substantially underestimate the amount many individuals have saved for retirement. Other sources, such as IRAs, DB plans, and DC plans from prior employers, paint a more optimistic, glass is half-full, outlook. Key findings from the report include:
Earlier blog entries have suggested that one should look at the big picture when it comes to retirement savings, in the context that saving for retirement is an important goal, but one that competes with other financial challenges. It would appear that while we are looking at this holistically, it is also important to factor in all financial resources beyond account balances from a single employer's 401(k) plan. 12/29/2013 1 Comment 2013 Retirement Year in ReviewThe year 2013 was a mixed bag for retirement savings. Account balances continued to increase, primarily due to positive results on Wall Street, but other financial pressures continued to impact many participants despite their best efforts. Here are some of the key topics and trends covered in this blog throughout 2013:
We will continue to monitor interesting trends in 2014, and welcome comments, feedback, and topic suggestions. Happy New Year to all!! 12/16/2013 0 Comments Weak Housing Market Worries SaversAlthough housing prices have increased recently, the improvement from the 2008-2009 downturn has been modest at best compared to the improvement in equities. The improvement has primarily benefited the top one-third of households, while the bottom two-thirds continue to struggle. According to the Center for Retirement Research (CRR) at Boston College, equity prices have increased by 45% since 2010, adjusting for inflation, versus just 6% for housing prices. For the top one-third, the "at-risk" group declined slightly to 40%. Will the other groups showed a very slight improvement, more than half remain at risk (52% for middle income, 60% for lower income). The CRR notes that housing is a much more significant asset for most households than are equities.
According to a Nationwide Financial survey conducted by Harris Interactive, spiraling healthcare costs are top of mind for pre-retirees. The survey found that 61% are now "terrified" of healthcare costs in retirement, compared to under 50% when measured last year. Of those surveyed, nearly two-thirds have not yet spoken to a financial advisor about their plans for retirement, and even for those who have had such a conversation, less than one in four has discussed healthcare costs in retirement that aren't covered by Medicare.
What makes the survey results even more disconcerting is that the survey focused on more affluent households - about 800 individuals over age 50 with household incomes of at least $150,000. One would expect that the concern is even greater for households with lower income. There has been a profound change in how participants are using lump-sum distributions that they might receive upon leaving an employer. In the past, many would look at these sometimes large distributions as some sort of windfall. A report from the Employee Benefit Research Institute (EBRI) suggests that this attitude has changed, and for the better. While some still use these distributions for consumption purposes, large numbers are rolling over their distributions to other tax-qualified retirement plans or IRAs. Another large segment is using the distributions toward paying down debt, establishing a business, or applying it to a mortgage or other loan. In 1993, more distributions went toward consumer purchases than to rollovers to qualified plans or IRAs. In 2012, rollovers are way up and consumer spending is way down when it comes to lump sums.
What I think this suggests is that while saving for retirement is a very important goal, it is still part of a more comprehensive financial picture. Understanding this and creating solutions to help individuals who are trying to navigate their own situations will be key to keeping them on the right path toward a more secure retirement. Merely telling a participant to save more for retirement without addressing their other financial circumstances will most likely fall short. While we have seen average account balances continue to rise to record levels and rebound from the economic decline of 2008-2009, the precipitous drop in housing prices at that time has made many individuals and families continue to struggle to bounce back. Nonetheless, the EBRI report is encouraging because it suggests that individuals are doing their best to act responsibly in managing their finances to the best of their respective abilities. more more |
Blog Author - Ken FelsherWith over 25 years of writing, editing, and research experience. I enjoy sharing with my readers my love of working with content on a variety of subjects. CategoriesAll 401(k) 402(g) Boomers Catch-up DB Dc Deferral Limit Defined Benefit Defined Contribution ERISA Healthcare Participation Pension Professionally Managed RCS Retirement Retirement Confidence Tax Code Vanguard Women Working Archives
March 2015
|