The ‘Finished’ Line?

We’ve been through a lot the past several weeks—and doubtless those events have unsettled (if not upended) the retirement plans of many. Or have they?

 

Recently, the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Inc. unveiled the 30th annual Retirement Confidence Survey (RCS)—the longest-running annual retirement survey of its kind in the nation. Indeed, the RCS is unique in offering a perspective on retirement that is longer than many retirements.

Now, I’ve been tracking this particular survey with interest for a good part of those 30 years—generally finding myself marveling at the (relatively) high rate of confidence in the (relatively) low amounts of savings reported by these same individuals (bearing in mind that what people say they have and will do is not always reality). 

 

The most recent iteration found that 69% of all workers claimed to be very or somewhat confident in their ability to live comfortably throughout their retirement years, comparable to 2019—though that was based on a January polling. So, cognizant of the dramatic events of the ensuing weeks, the researchers at EBRI and Greenwald & Associates went back to the field in late March—and found that the percentage of workers feeling confident remained “statistically unchanged”[1] at 63%.[2]

 

Now even late March might have been too soon to capture the full impact, but you might well expect that confidence is impacted, if not influenced, by movements in the market. However, back in 2006 EBRI noted that “RCS data over the past 12 years continue to show that retirement confidence overall among workers does not seem to be affected by either stock market performance or varying economic conditions.” Just two years later—though before we hit the worst of the 2007-08 financial crisis—the RCS noted the biggest one-year drop in confidence in its (then) 18-year history. However, even then, 18% were (still) “very confident” about having enough money for a secure retirement. 

If the confidence levels don’t seem to be impacted by the financial markets, there’s little doubt that their overall sense of the economy and their employment prospects do at least nudge them, certainly in the short term, and that did seem to be a factor in the decline noted in the 2020 RCS between January and March. That said, the share of workers in 2020’s RCS reporting that they feel either very or somewhat confident has increased “significantly” since 2017 according to the researchers, with more than two-thirds (69%) now in that category versus 60% just three years ago. 

 

Beneath that confidence reading, nearly one in five (19%) in the 2020 RCS were very confident that they knew how much money they would need each month in retirement—and 45% were somewhat confident. Similar numbers claimed to know how much money they need to have saved by the time they retire (so that they could retirement comfortably in retirement—ditto the percent who felt they had the ability to choose the right retirement products or investments for their situation.

 

There’s comfort in knowing that the 2020 RCS found that those with access to a retirement savings plan at work were more likely to save (“dramatically more likely,” EBRI notes), “significantly” more likely to have savings, and less likely to have no savings or to have high levels of debt. Little wonder that, according to the RCS, workers reporting they or their spouse have money in a DC plan or IRA or have benefits in a DB plan from a current or previous employer are nearly twice as likely as those without any of these plans to be at least somewhat confident (78% with a plan versus 41% without a plan). 

And yet, only 44% of respondents overall said they had estimated how much money they would need each month in retirement. And just under half of workers (48%) report they and/or their spouses have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement (that’s a bit higher than the historic norms here—but not much higher[3]).

 

While the findings in the RCS have never seemed to motivate a resurgence of interest or activity surrounding those assessments, perhaps as we emerge from this uncertain time, as we begin to take stock of our lives, our work, and our finances, workers will be more open to those considerations, more willing to establish emergency savings, more attentive to issues of personal health.

 

It may be worth noting that the 2020 RCS also found that 6 in 10 workers (61%) report that they either strongly or somewhat agree with the statement that preparing for retirement makes them feel stressed. 

 

Though I’m guessing that’s not nearly stressful as getting to retirement without having done so. 

 

 

[1] I won’t quibble here with the math of that characterization, though I will comment that a drop from 69% to 63% strikes me as at least “noticeable.” 

 

[2] In fairness, as noted above, the researchers did find some impact, though the percentage of workers feeling confident remained “statistically unchanged” at 63%. For retirees, the percentage barely changed from 77% in January who felt confident to 76% when the survey was re-fielded in March. Compared to 2019, the level is down slightly from 82%. The report notes that, at an individual level, larger discrepancies emerged when looking only at workers who felt their economic security/employment was at risk.
[3] There’s some further comfort in knowing that workers reporting that they or their spouse participate in a retirement plan were significantly more likely than those who do not participate in such a plan to have tried a calculation (58% versus 11%).