There is most definitely a crisis of retirement confidence in America. In its latest annual survey of how we rate our retirement prospects, the non-partisan Employee Benefits Research Institute found that only 1 in 8 of us is in fact very confident we will be in good financial shape. But wait, it gets worse. The 27 percent of us who say we are not at all confident we will have enough to live on in retirement marks an all-time high in the 21 years EBRI has been checking our retirement planning pulse.
Jack VanDerhei, EBRI's research director, had an interesting spin on this year's depressing findings: "To me, these are positive findings...People's expectations need to come closer to reality so they will save more and delay retirement until it is financially feasible." I'm not sure abject pessimism should ever be characterized as a positive, but following VanDerhei's line of reasoning, there are in fact a few key steps you can take -- must take -- today if you're looking to boost your retirement confidence. And who isn't?
Here are a few key moves you can make:
- Run the numbers. According to the EBRI survey, 58 percent of us are just guessing at what we need to have saved up for retirement. Only 42 percent of respondents in the 2011 survey report having attempted to work through a retirement calculation, or hiring a financial advisor to do the crunching. Yet the EBRI survey reports that people who do take the time to size up their situation are twice as likely to say they are very confident they will be just fine come retirement, compared to the ostriches who refuse to take a look (26 percent v. 11 percent). It's not that a retirement calculator will necessarily make you feel great. But it can be a clarifying wake-up call that motivates you to focus on how you can step up your retirement game plan.
- Channel your fear. In 2009, 75 percent of workers said they or their spouse had at some point saved for retirement. Fast forward to 2011 and that number's down to 68 percent. And the percentage of workers who say they are currently saving is down to 59 percent from its 2009 high of 64 percent. Some of that drop is due to high unemployment, but perhaps the fact that we're two years past the depths of our financial crisis fears is also breeding a lack of savings urgency. Unless you're banking on a rich pension, there's just no getting around the need to save. And save more. Greg Burrows, a retirement planning executive at the Principal Financial Group spends a lot of time running the numbers. His advice is that you should aim to save no less than 11 percent of your annual salary to have a shot at a comfortable retirement.
- Stop assuming you will work until 70 or later. According to EBRI, the percentage of people who say they plan to still be working until at least age 70 has jumped from 11 percent a decade ago to 25 percent today. "Just Keep Working" has pretty much become the go-to New Normal retirement strategy. While there is no question that delaying your retirement is a smart goal, it's also not entirely within your control. The fact is, 45 percent of current retirees who expected to keep working ended up retiring earlier than they anticipated, most often because of a personal illness, having to care for a family member who became ill, or a layoff. That's nearly half of today's retirees who said they had the same idea about working longer, but couldn't pull it off. As MoneyWatch's Steve Vernon often stresses, you can help your odds by living a healthier lifestyle, but the experience of today's retirees can't be overlooked. "The goal should be to plan as if you won't be able to keep working into your 70s," says Burrows. That means saving at a rate today that will leave you in solid shape even if you can only work until your early to mid 60s. If all goes well and you can keep working, great. You have options to choose from. But if you don't save more now and have to stop work earlier that's a recipe for a whole lot of stress.
- Forget about your employer provided health benefits in retirement. EBRI found an odd disconnect between hope and reality when it comes to employer provided health benefits in retirement. Thirty six percent of workers today say they expect their employer will provide some level of health insurance in retirement. Yet only 27 percent of today's retirees say they currently get any such benefit. And to state the obvious, this is one benefit that is not expected to experience some sort of miraculous renaissance. The advice here is much like the work-longer advice: Don't count on it. Does that mean trying to save more today? Yes. But that's the price you pay so you can be more confident your retirement won't be spent worrying about your finances.