A new survey has found Americans' confidence in their ability to save for retirement has dropped by the largest rate since 2008's financial crisis. The 2023 Retirement Confidence Survey (RCS), conducted by the Employee Benefit Research Institute (EBRI), is the longest-running survey of its kind measuring worker and retiree confidence. It was conducted earlier this year.
The survey results show that although a majority of both workers and retirees have confidence that they will have enough money to live comfortably through retirement, that confidence has slipped 9 percentage points for workers and 4 percentage points for retirees.
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"The confidence both workers and retirees have in their ability to finance their retirements has dropped significantly in 2023. The last time a decline in confidence of this magnitude occurred was in 2008, during the global financial crisis. This shows that the current economic climate—in particular, inflation—is eroding the confidence that Americans had in their retirement preparations going into the pandemic," said Craig Copeland, director of wealth benefits research at EBRI.
As other surveys have found, both workers and retirees are concerned that a continued increase in the cost of living is making it harder for them to save money. The concern is greater among workers (84%) than retirees (67%), but both groups are worried about inflation.
The EBRI report found that 4 in 10 workers, and 3 in 10 retirees, are not confident their money will be able to keep up with inflation in retirement, which was a significant increase compared with the one-third of workers who felt this way last year.
At the same time, debt levels are rising, another red flag for those who are saving for retirement. "Workers' debt problems appear to be worsening in 2023," the report said. "Significantly up this year compared with 2022, over 6 in 10 workers report their debt is a problem. However, consistent with last year, 34 percent of retirees report the same."
That finding fits with some other interesting data from the report—it appears that those still in the workforce are more worried about their retirement savings than those who are actually retired. For example, two-thirds of workers said they feel they have enough savings for retirement, but three-quarters of retirees feel their savings are sufficient.
"Americans, after reaching age 55 or older, are more likely to have had experience with retirement accumulation products and know more about how they stand in their retirement preparations," Copeland noted. "Retirees know their circumstances and have for the most part adjusted to them, so that they are confident they can continue to do so. Younger workers don't know what their future holds and what government programs will be available to them when they do retire."
A Need for Information
The study also underscores the need for information and advice on retirement planning. The survey found that some workers don't understand concepts such as target date funds or environmental, social, and governance (ESG) funds.
"Many workers aren't using professional sources of information and advice that can help improve their investment know-how," the report said, adding that less than half of workers and retirees say they have a personal financial adviser for retirement planning.
Copeland noted that some plan participants are not knowledgeable about investing. "While many participants have come to understand what needs to be done, each year a group of participants are doing investing for the first time and do not have the experience and knowledge of those with more experience," he said. "Understanding the mechanics of good investing can lead to a successful retirement for many. Furthermore, workers and retirees have many competing goals—for example, increasing asset levels versus having a stream of income, and managing their own investments versus wanting guaranteed income."
Overall, Copeland said, factors such as a lack of preparation plus bad economic news are contributing to the low levels of confidence about retirement savings. "Americans need help in navigating today's economic environment, as many are not well-informed on where to go for good advice," he said. "Preparation for retirement helps with confidence. Workers and retirees need help in turning their money into income, as they want both asset preservation and income stability. There is still a great amount that needs to be done to prepare workers for retirement."
From: BenefitsPRO
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