The 2013 Retirement Confidence Survey has been released by the Employee Benefit Research Institute. The findings expose severe problems among retirement savers.
The outliers are those who are “very confident” (18%) and “not at all confident” (14%).
Here are the unreal numbers as I assess them: Those surveyed were asked how much they believe they will need to save to achieve a financially secure retirement. 20 percent replied that they will need to save between 20 and 29 percent of their income. Another 23 percent replied that they need to save 30 percent or more of their income.
For the vast majority of people, those savings rates are nowhere near sustainable. In other words, the perceptions of what is doable in retirement savings rates far exceeds reality.
I don’t know how these proposed retirement savings rates got into the heads of those surveyed because only 46% had even tried to determine how much money they will need to retire securely.
I have sympathy for these folks and hope they find a way to cause their perceptions and realities on retirement planning to converge. The starting point has to be actually estimating what it will cost them to live in retirement under a reasonable set of assumptions.
The survey report includes a chart showing retirement savings amounts by age. This chart is quite illuminating. For those age 55 and older, 36% had saved less than $10,000 for retirement!
24% of those in this boomer age bracket reported having saved more than $250,000. For some folks without substantial pensions or gold-plated private insurance, even this savings level could be a bare minimum amount needed because of future out of pocket health care costs which many estimate could be north of $200k.
Other big picture responses to all of this information may be: (a) Social Security and 401(k) accounts cannot in combination meet the retirement needs of pension-less middle class retirees; and (b) retirement savings contributions should be mandatory, over and above current Social Security payroll taxes. Imposing retirement savings discipline from day one of your working life may be the best option for everyone. Don’t let the workers ever see the money.
Here is a link to the EBRI 2013 Retirement Confidence Survey.
What is your take on all of this?