EBRI Issue Brief
Will More of Us Work Forever? The 2006 Retirement Confidence Survey
• This Issue Brief reports findings from the 16th annual Retirement Confidence Survey® (RCS), which suggests that many American workers are not ready to undertake the task of financial planning for their own retirement and face the prospect of having to work far longer than they expect.
• Key indicators steady: Key indicators of retirement planning have held steady in recent years. The proportion of workers saving for retirement continues at 7 in 10 (70 percent), while those who report having attempted to calculate their savings needs for retirement remains at 42 percent.
• Modest savings: More than half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000 (52 percent). However, the large majority of workers who have not put money aside for retirement have little in savings at all: Three-quarters of these workers say their assets total less than $10,000 (75 percent).
• Expected benefits unlikely to materialize: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 40 percent of workers indicate they or their spouse currently have a defined benefit plan, yet 61 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect (37 percent) as retirees are to receive (40 percent) retiree health insurance through an employer, despite the fact that the number of employers offering this benefit is declining.
• Unrealistic replacement ratios: Worker suppositions about their financial needs for retirement are often based on what appear to be unrealistically low income replacement ratios. While a majority of workers say they prefer a standard of living in retirement that is the same or better than in their working years (59 percent), half think they can maintain a comfortable retirement on 70 percent or less of their preretirement income (50 percent).
• Ability to keep working? Some workers may have unrealistic expectations about how long they can continue to work. The average retiree today retired at age 62, but the average worker expects to retire at age 65. At the same time, workers are more than twice as likely to expect to work for pay in retirement (67 percent) as retirees are to have actually worked (27 percent).
• Some confidence levels not realistic: The RCS continues to find that one-quarter of workers are very confident about their financial security in retirement (24 percent), while more than 4 in 10 are somewhat confident (44 percent). However, at least some of those who say they are very confident may be overconfident. Twenty-two percent of very confident workers are not currently saving for retirement, 39 percent have less than $50,000 in savings, and 37 percent have not done a retirement needs calculation.
• Auto-enrollment well received: To boost participation, employer plans could be further enhanced by adding automatic options. A majority of employed workers favor automatic enrollment (69 percent), automatically increasing the percentage of salary contributed when an increase in pay is received (65 percent), and automatically investing contributions for the employee (59 percent). Plan participants and nonparticipants are equally likely to favor each of these automatic features.