April 9, 2008
The first baby boomers are approaching age 65, but new research suggests an increasing number are putting off retirement, because they simply can't afford it, according to the Retirement Confidence Survey, conducted by the Employee Benefit Research Institute.
The percentage of workers very confident about having enough money for a comfortable retirement decreased sharply, from 27 percent in 2007 to 18 percent in 2008, the biggest one-year drop in the 18-year history of the survey.
Retiree confidence in having a financially secure retirement also decreased, from 41 percent to 29 percent, a drop of 12 percentage points.
Decreases in confidence occurred across all age groups and income levels but was particularly acute among younger workers and those with lower income.
Health care
The results indicate health costs in particular have become a big concern for retirees: among retirees who left the work force earlier than planned, more than half -- 54 percent -- say they did so because of health problems or disability.
Almost half of retirees, 44 percent, say they have spent more than expected on health care expenses.
More than half of retirees say they are now more concerned about their financial future than they were right after they retired, a 14 percentage-point increase from a year ago. The figure was 40 percent in 2007.
"In the nearly two decades we have been conducting the RCS, this year's results show a very dramatic reduction in the public's confidence about having a comfortable retirement. The economy and health costs are major concerns," said Dallas Salisbury, EBRI's president. "If there is a silver lining, it's that Americans finally may be waking up to the realities of being able to afford retirement."
In addition, the survey found that about half of workers say they and/or their spouse have tried to calculate how much money they will need for a comfortable retirement, up considerably from the low point of 29 percent measured in 1996.
As before, the 2008 survey finds that doing a retirement savings calculation is particularly effective at changing worker behavior: 44 percent who calculated a goal changed their retirement planning, and of those almost two-thirds -- 59 percent -- started saving or investing more.
The survey picked up several other signs of public unease about retirement:
• Overall concerns about basic expenses: Confidence in specific financial aspects related to retirement decreased. In particular, the percentage very confident in having enough money to take care of basic expenses decreased from 40 percent in 2007 to 34 percent in 2008 for workers and from 48 percent to 34 percent for retirees.
• Worker health concerns: Measured another way, workers said they are increasingly not confident about having enough money for medical expenses (43 percent in 2008, up from 32 percent in 2007) and for long-term care expenses (54 percent in 2008, up from 44 percent last year).
• Retiree concerns: Retirees' loss of confidence is reflected in several attitudes they hold about their retirement finances. Retirees are less likely than in 2007 to believe they can always cut back on their lifestyle if it looks like they might use up all of their savings (61 percent, down from 70 percent). At the same time, 39 percent of retirees now think they are likely to live long enough to use up all of their savings (up 10 percentage points from 29 percent in 2007).
• Retiree health coverage: Barely one-third of all workers now expect to have access to employment-based health insurance in retirement, down 8 percentage points (from 42 percent in 2007 to 34 percent in 2008). Although 41 percent of retirees say they currently have access to health insurance through a former employer, many employers are eliminating health care coverage for future retirees.
• Confidence by age and income: The percentage saying they are very confident about having enough money for a comfortable retirement decreased from 31 percent in 2007 to 18 percent in 2008 among workers ages 25-34, and from 28 percent to 16 percent among workers ages 35-44. Similarly, it decreased from 14 percent to 5 percent among workers with household income under $35,000 and from 25 percent to 13 percent among those with income of $35,000-$74,999.
