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A Closer Look at EBRI’s $1,000 Savings Number

 

Research released by EBRI March 18 shows that a sizable portion of the population has saved very little. That’s sobering by itself, but a closer look reveals more regarding what that means for retirement plan participants and sponsors.

EBRI’s 2014 Retirement Confidence Survey included a finding that 36% of workers studied have less than $1,000 in savings and investments — a sobering data point. However, that figure excludes the value of the workers’ primary residences and the value of their defined benefit plan benefits — a fact that several reports in pop media outlets failed to mention.

EBRI reported that 11% of those in this group participate in a DB or DC plan or own an IRA. Still, the vast majority of those who have saved that little are not participating in a DB or DC plan, or do not have an IRA — 73%, says EBRI. On the other hand, EBRI found that 62% of those who participate in a retirement plan have savings of at least $25,000.

Perhaps mitigating the poor savings rate somewhat is evidence that there is widespread acknowledgement among participants of at least the need to save. According to Yahoo Finance, a whopping 93% of respondents to the Capital One ShareBuilder’s Financial Freedom Survey said they know they should be saving for their retirement. And 90% of respondents to a recent Investment Company Institute study said that participating in a 401(k) encourages them to think about the future.

In addition, while savings may not be uniformly high, confidence is increasing nonetheless. EBRI’s RCS says that more than half of workers they studied are at least somewhat confident they can fund a comfortable retirement for themselves. And the Capital One ShareBuilder survey found that U.S. workers are becoming more confident about making investment decisions.