On April 24th, EBRI released its 28th annual Retirement Confidence Survey (RCS) produced in conjunction with Greenwald & Associates.
Among the findings, we learned that retirees’ confidence in their ability to afford certain retirement expenses declined. While 85 percent of retirees surveyed in 2017 expressed confidence in their ongoing ability to afford basic expenses, only 80 percent expressed such confidence this year. And, confidence in their ability to afford medical expenses is also down – 77 percent in 2017 vs. 70 percent this year.
While retiree confidence in these aspects of the affordability of retirement declined, the confidence workers have in living comfortably throughout retirement increased in 2018.
Even so, workers appear to be facing their own challenges, as they expect much more of their retirement income to be from sources that do not pay a guaranteed monthly income.
The RCS shows how workers’ expectations of the sources of income in retirement might differ from the sources of income for current retirees: 26 percent of retirees report receiving income from work, while 68 percent of workers expect working for pay to provide them income in retirement; 2-in-3 retirees report Social Security is a major source of income, while only about a third of workers believe Social Security will be a major source; and more than 4-in-10 retirees report income from a defined benefit (DB) or pension plan is a major source of income, while only 32% of workers expect a DB plan to be a major source for them in retirement.
Most current workers expect to rely on “income” sources that require both a savings strategy during their working years and a withdrawal strategy to create income in retirement. Workers see their workplace defined contribution (DC) retirement plans as a source of income in retirement far more than retirees report they have. Eight-in-ten workers say they believe their DC plan will be a major or minor source of income in retirement, compared to just 50 percent of retirees. Six-in-ten workers say they also expect income in retirement from an Individual Retirement Account (IRA).
As we transition to a generation of retirees that will be primary dependent on DC plans, how do workers plan to convert savings to income? In 2018, for the first time, DC plan participants were asked about their plans for the money accrued in their plan when they retired. Only half of workers are confident that they know how much income they will need each month in retirement or how to withdraw income from their savings and investments, with only 1 in 8 very confident.
In short, future retirees’ potential greater reliance on unpredictable sources of income combined with their lack of confidence in withdrawing income from their savings and investments is noteworthy—especially in light of its juxtaposition with their increased confidence in living comfortably throughout retirement.
The RCS is produced annually through the generous support of our funding members: AARP, Conduent HR Services, FINRA , J.P. Morgan, Lincoln Financial, Mercer, MetLife, Nationwide Financial, Principal Financial Group, T. Rowe Price, The Segal Group, U.S. Chamber, Vanguard, and Wells Fargo.