Although confidence is still a long way from the historic highs seen during the 25-year history of the Retirement Confidence Survey, 22 percent of workers now say they are very confident about having enough money to live comfortably throughout their retirement years. That’s up from 18 percent last year and a record low of 13 percent in 2013.
The 2015 Retirement Confidence Survey, released by the Employee Benefit Research Institute and co-sponsored by the Principal Financial Group, also found that respondents view debt as less of a problem than in years past. Among workers, those reporting debt as a major problem dropped from 20 percent last year to 13 percent this year, while those saying it was not a problem rose from 42 percent last year to 49 percent this year.
“Debt can be a huge distraction from savings goals, and many may view it as a reason to not save anything for retirement,” said Luke Vandermillen, vice president at The Principal. “It’s encouraging to see debt becoming less problematic for some. For those who continue to struggle, it’s possible to simultaneously pay down debt while saving for retirement by creating a plan and sticking to it.”
Reports of increased confidence are almost exclusively from those who indicate they or their spouse has a retirement plan (defined-contribution, defined benefit or individual retirement account). Nearly half of workers without a retirement plan are not at all confident about their financial security in retirement, compared with only about one in 10 who have a retirement plan.
If automatically enrolled in an employer-sponsored retirement plan at a 6 percent salary deferral rate, three-quarters of respondents would continue that 6 percent contribution or raise it. Similarly, 46 percent would continue auto-escalation of their contribution (increasing 1 percent per year) until the contribution reached 10 percent of their salary or higher.
“Workers are recognizing the value of automatic features in their employer-sponsored retirement plans in helping them reach their savings goals,” Vandermillen said. “Our analysis over the years has found that saving 10 percent of your salary, plus any employer match, over the course of a working career is the key to achieving a more secure retirement[1]. These simple, yet critical, plan features can make a huge difference.”
Many behind schedule
Despite improvements in confidence levels and issues with debt, many of the warning signs about lack of preparation have not changed. Nearly two-thirds of workers say they are behind schedule in planning and saving for retirement. And only one third spend more than eight hours a year—or about one working day—on planning for retirement.
Other key findings include:
Full survey results are available at www.ebri.org. For more research, analysis and insights from The Principal, visit The Principal Knowledge Center.
By Ayo Mseka
Editor-in-Chief