Despite recent economic booms, Americans’ confidence in their golden years has not increased. In fact, through the last six years a steady 20 percent to 25 percent of working Americans have indicated they are very confident they will have enough money to live comfortably throughout their retirement. A slightly higher proportion— about one-third—are not confident about their income prospects today. The number of working Americans not confident has increased slightly in six years—up from about one-quarter in 1993.
When considering specific aspects of retirement, workers today are most concerned that they will not have enough money for long-term care. About one-third are not confident about having enough money for medical expenses, leisure pursuits, or to support themselves no matter how long they live.
There is an increase in the number of Americans who are attempting to calculate what they need to have saved for their retirement. In 1998, just less than one-half of workers report they have made the calculation (45%), while in prior years just one-third had done so (32% in 1996). When looking into this increase further, we find that it is primarily driven by aging baby boomers who are waking up to retirement realities.
One-third of Americans are not saving for retirement (36%). According to the Retirement Confidence Survey (RCS), most believe they have too many current financial responsibilities to be able to save for retirement. Despite this, more than one-half of both savers and nonsavers agree they could afford to save an additional $20 a week more than they are currently saving for retirement. The sacrifices they would make include dining out less and spending less money on entertainment.
Among those who are saving for retirement, fear appears to be a strong motivational factor in prompting them to begin putting away money for retirement. Workers indicate that seeing people not prepare and therefore struggle in retirement or realizing that time was running out for preparing are two of the strongest motivators.
The RCS also reveals that employer-provided retirement planning information can have a measurable and positive impact on savings behaviors. Respondents who indicate they have received information from an employer are more inclined to be saving for retirement and to have calculated how much they need to have saved prior to retirement; many report that employer-provided information is a useful source of retirement savings investment information.
This year, the eighth annual RCS takes a closer look at three specific minority groups in America. We find that Hispanic-Americans are less likely to be saving for retirement than are African-Americans, Asian-Americans, or whites. Both African-Americans and Hispanic-Americans are less confident about many specific aspects of retirement, including: having enough money for leisure activities, to support themselves no matter how long they live, and for basic expenses during retirement. (Note: Throughout this summary, significant differences among ethnic groups are noted where relevant.)
Confidence in Retirement
The 1998 RCS finds more than four out of five Americans do not believe that people in the United States save enough money for retirement (82%); this perception has remained unchanged for the past seven years. Just seven percent of all Americans say that people do save enough money for retirement. Similar proportions of retirees and workers say people save enough (7% v. 9%, respectively). Hispanic- and Asian- Americans are more likely to believe people save enough for their retirement (15% and 19%, respectively).
Three of five Americans are very or somewhat confident they will have enough money to live comfortably throughout their retirement (61%). However, more than one-third (36%) are not confident about it. Confidence has decreased this year, down eight points from 69% in 1997. This drop in confidence is primarily driven by a significant drop in retirees’ confidence— from 74% confident to just 51% confident.
The 1998 RCS shows that workers’ general confidence has remained steady since 1997, confirming an observed increase in the proportion of workers not confident they will have enough money for a comfortable retirement since the question was first asked in 1993 (26% not confident in 1993, 31% not confident today).
African-Americans are significantly less confident that they will have enough money for a comfortable retirement. Just one-half are very or somewhat confident (50%). Nearly as many are not confident about having enough money (49%).
Older baby boomers are significantly less confident today than they were last year. In 1997, one-quarter of older baby boomers indicated they were not confident they would have enough money for a comfortable retirement (26%). The 1998 RCS finds that number has increased to more than one-third not confident (35%). Workers who are significantly more concerned about retirement this year are those with $25,000 to $35,000 in annual household income (35% v. 41% not confident in 1998). Among generation X-ers, a smaller proportion express low confidence this year than last (32% not confident in 1997, 24% in 1998).
Among workers, there has been a significant drop in confidence about financial preparation for retirement since the 1997 RCS (from 32% to 25% very confident). Workers are also less confident about having enough money for basic expenses (from 44% to 38% very confident). Among both retirees and workers, confidence in having money for leisure pursuits has declined significantly—among workers there has been an eight point decline (from 25% to 17% very confident); among retirees there has been a six-point decline (from 38% to 32% very confident).
Hispanic-Americans are less confident about each specific aspect of retirement. African-Americans are less confident about four of the six specific aspects of retirement inquired about: having enough money for 1) basic expenses, 2) leisure pursuits, 3) long-term care, and 4) supporting themselves no matter how long they live.
Sources of Income in Retirement
Retirees today are relying on Social Security as their most important source of income (42%). Just 13% of workers are expecting to rely on Social Security as their most important source of income. Retirees are less likely than workers to indicate that an employer-based plan is their most important source of retirement income (9% v. 23%) or other personal savings (10% v. 16%).
In the 1998 RCS, workers indicate they are going to rely on their own personal savings less than they have in previous years. In 1997, one-half of workers (51%) saw savings from work-related plans they contribute to or other personal savings as the most important source of retirement income; only 39% feel that way today. Specifically, workers who are nearing retirement age and older boomers are significantly less likely to indicate personal savings will be their most important source of retirement income. Just three in ten pre-retirees or older baby boomers are going to rely on personal savings (30% and 29%, respectively), while a majority of generation X-ers expect to rely on personal savings (52%).
Asian-Americans have significantly higher proportions who report they are expecting money they saved through a work-based retirement plan to be a major source of income (49% v. 38% of all Americans). Both Asian-Americans and Hispanic-Americans are more likely to say they expect that employment (24% of Asian-Americans, 30% of Hispanic-Americans v. 14% of all Americans) or family support (10% of Asian-Americans, 14% of Hispanic-Americans v. 3% of all Americans) will be a major source of income. For Hispanic-Americans, other government programs, such as veterans’ benefits or SSI are significantly more likely to be a major source of retirement income (17% v. 6% of all Americans).
Determining a Savings Goal
The proportion of workers who have attempted to figure out how much money they need for retirement has increased nine points from 1997 (45% from 36%). However, a majority of current workers still have not attempted to calculate how much money they will need to accumulate for retirement (54%). Only one in five Hispanic-Americans has attempted to calculate how much he or she would need for retirement (22%), significantly fewer than other Americans.
The 1998 RCS reveals that the increase in workers who attempt to determine a savings goal is largely due to significant proportions of baby boomers who are now planning for retirement. About one-half of boomers in the 1998 survey report they have tried to make this calculation (48%), while in 1997, just one-third had (34%). The 1998 results also show that working men are more likely than working women to have attempted the calculation (49% v. 40%).
This year’s RCS finds that 63% of Americans have saved for retirement. The proportion is similar among workers (63%) and retirees (65%). Among those who are not personally saving for retirement, about one-quarter say they have some funds earmarked for retirement (23%). One-quarter (26%) of workers say they have funds earmarked for retirement, while one in six retirees indicates the same (16%); however, this is not a significant difference. In total, seven out of ten Americans have money, aside from Social Security, specifically designated for their retirement (72%).
Not surprisingly, workers who are nearing retirement have a higher proportion of people who have accumulated funds for retirement (78%) than generation X (65%). Men are more likely than women to indicate they have begun saving for retirement (69% v. 57%).
Among minorities, Asian-Americans are more likely than African-Americans or Hispanic-Americans to indicate they have begun saving for retirement (62% of Asian-Americans are saving). Majorities of African-Americans (52%) and Hispanic-Americans (62%) indicate they are not currently saving any money for retirement.
Working savers report that the strongest sources of motivation to start saving for retirement have been seeing people who have not prepared and have struggled (48%) or realizing that time is running out to prepare for retirement (37%). For one-third of working savers, the availability of a plan or educational material in the work place provided a lot of motivation (33%). For one-quarter, it is a family event that prompts them to act (25%). A few are motivated to save through a professional financial advisor (18%), the media (17%), or advice from family or friends (15%).
Could Americans Save at Least $1,000 a Year?
Significant majorities of both savers and nonsavers say they could save $20 per week more than they are saving now for retirement. If this were the case, Americans could save an additional $1,040 a year.
In total, over one-half of workers indicate they think they could save $20 more than they are saving for retirement now (56%). The number who believe they could save an extra $20 is similar for those who are already saving (57%) and those who are not (55%). In order to save the additional money, most would give up dining out and some entertainment.
Investing for Retirement
Less than one-half of workers who are saving for retirement are very confident that they are investing those retirement savings wisely (46%). A similar proportion is just somewhat confident about their investments (47%). Workers nearing retirement age (between 55 and 64) have the highest proportion who are very confident they are investing wisely (53%), while the least confident are the younger baby boomers, of whom just more than one-third are confident about their investments (38%). Working men report higher confidence in their investments than do women (52% v. 38%).
Three of ten savers indicate they do not like to make investment decisions regarding their retirement savings (31%). A majority say they enjoy making investment decisions (64%). Among savers who are currently working, generation X-ers are more likely than others to report they enjoy making investment decisions (72%). Males are more likely than females to report they enjoy these types of decisions (70% v. 53%).
When making their investment decisions, savers most often indicate they use input from a spouse or partner (79%). A majority also use written material provided by a retirement plan from their work place (55%), other written material (57%), or the advice of a financial professional (51%). Four of ten savers indicate they use the advice of family or friends (43%) and information from television or radio (37%). Half as many use information from seminars (23%), computer software (15%), or the Internet (18%). Among those who use these resources, the advice of a financial professional was considered the most helpful (28%); spouses (18%) and information from the work place (15%) also receive many votes as most helpful.
A vast majority of savers say they want descriptions of their options when making retirement fund investment decisions (82%). Six out of ten would like to have specific recommendations, examples of investment packages for workers at different ages, or worksheets that show how much they need to save.
In total, slightly more than one-third of working Americans are not personally saving money for retirement (36%). The major reason workers who are not saving give for not saving for retirement is that they have too many current financial responsibilities (66%). Half as many indicate economic events such as inflation and unemployment as major reasons for not saving for retirement (31%). About one-quarter indicate they do not save because they are not offered a retirement savings plan at work (25%), they feel they have plenty of time until retirement (27%), or they are expecting a pension (28%). Just slightly fewer are not saving because they do not believe they will retire (19%), they just have not thought about it (21%), or they believe retirement will work itself out (20%).
White Americans are more likely than minorities in America to say a major reason why they cannot save is because they have too many financial responsibilities. Hispanic-Americans are more likely to indicate they are expecting Social Security to take care of them (27%), their children will help out (16%), or they just have not thought about retirement (32%). For one-third of Spanish-speakers, not being able to find information in Spanish is a major reason they have not begun to save for retirement (32%)
Many retirees say that retirement has exceeded their expectations. Two of five believe their overall standard of living and having money for entertainment and leisure is better than they expected (40% each). Around one-third say having money to assist family members and cover medical expenses is better than they expected (32% and 34%, respectively). However, between one-fifth and one-quarter say these elements have declined. Money for helping family members and for leisure pursuits are considered worse than expected by about one-quarter (26% each). For one-fifth, their overall standard of living and having money for medical expenses is worse (20% and 22%, respectively).
Around one-quarter have worked for pay since they retired (24%), most indicating they worked part-time (18%). They say that major reasons for working are because they enjoyed it and wanted to stay involved (56%) or they wanted a satisfying way to spend their time (44%). However, one-third point to a need for money to buy extras (34%), and one-quarter need the money to make ends meet (28%).
Workers are expecting to work longer than today’s retirees did. However, about one-half still indicate they expect to retire prior to age 65 (49%). One-third indicate they do not expect to retire prior to age 65 (34%). Nine percent indicate they do not plan to retire. While almost one-half of generation X-ers say they expect to retire no later than age 60 (45%), half as many pre-retirees believe they will retire that early (21%).
About one-half of workers expect to be retired for 20 years or more. One-quarter indicate they expect to be retired for 20 years (26%), and another quarter expect to live more than 20 years in retirement (25%). Another quarter believe they will be retired for less than 20 years, while yet another quarter indicate they do not know how long they will be retired. Younger Americans, generation X-ers, and young baby boomers are expecting to live in retirement longer than Americans nearing retirement age—57% of generation X-ers expect to live 20 years or more in retirement, compared with just one-third of pre-retirees (36%).
Sixty-one percent indicate they expect to work after retirement. Younger baby boomers are most inclined to believe they will work for pay during their retirement (67%). The most commonly cited reasons are because they enjoy working and want to stay involved (60% say it is a major reason) or they want a satisfying way to spend their time (56%). However, nearly one-half expect to work for money to buy extras (46%), while more than one-third will work for money to make ends meet (38%).
Role of the Employer in Retirement Savings
About two in five working Americans report that they have received retirement planning and/or savings material from an employer in the past 12 months (39%). Those who are saving for retirement are more likely to have received information from an employer (45%) than those who are not saving (28%). Among minority Americans, Hispanic-Americans are significantly less likely to receive retirement savings material from an employer; just one-quarter report they received information (28%).
Workers who receive information from employers indicate the materials provided changed their savings or investment behavior in some way. Many changed the amount they contribute to a retirement savings plan or changed the allocation of money in a plan (43% each). A similar proportion of workers say they began to contribute to a plan (41%).
The most popular form of employer-provided retirement planning material is brochures (45%), followed closely by seminars (32%) and newsletters or magazines (25%). Less than one in five were provided with workbooks (17%), one-on-one counseling (15%), or telephone access to financial information (12%). Very few employers provide employees with retirement savings information in the form of online information, computer software (4%), or videos (5%).
These findings are part of the eighth annual Retirement Confidence Survey (RCS), a survey that gauges the views and attitudes of working and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The survey was conducted in March 1998, through 22-minute phone interviews with 1,500 individuals (1,142 workers, 358 retirees) ages 25 and older. Random digit dialing was used to obtain a representative cross section of the U.S. population. This year’s project also includes a special analysis of minority groups, specifically African-Americans, Hispanic-Americans, and Asian-Americans.
The RCS is co-organized by the Employee Benefit Research Institute (EBRI), a private, nonprofit, nonpartisan public policy research organization; the American Savings Education Council (ASEC), a partnership of more than 250 private- and public-sector institutions dedicated to raising public awareness of what is needed to ensure long-term personal financial independence, a part of the EBRI Education and Research Fund; and Mathew Greenwald & Associates, Inc. (MGA), a Washington, DC-based market research firm.
The 1998 RCS data collection was funded by grants from 33 public and private organizations, and the special report on minorities data collection was funded by grants from 14 organizations. Staffing was donated by EBRI, ASEC, and MGA. RCS materials and a list of underwriters may be accessed at the EBRI website: https://www.ebri.org/retirement/retirement-confidence-survey