Retirement Confidence at Record Low, Survey Says

The percentage of Americans who believe they have enough money to live comfortably in retirement has plummeted to a record low due to the recession, according to a survey released yesterday.

Just 13 percent of respondents said they were very confident they could live well in retirement, the lowest since the Employee Benefit Research Institute, a private nonprofit group that focuses on retirement and economic security issues, started tracking worker sentiment in 1993. It was the second consecutive year that worker confidence has dropped, but it is striking because it represents a 14-point decline since 2007.

Also noteworthy was the fact that current retirees say they have lost their ability to remain financially secure in retirement. Among this group, just 20 percent said they were very confident that they can live comfortably, down from 29 percent last year and 41 percent in 2007.

"By and large, they're not worried about investment risk as much as workers, but what they really got surprised on was the higher than anticipated health-care costs," said Jack VanDerhei, research director at EBRI.

Indeed, one-quarter of retirees said they were very confident about paying health expenses, down from 41 percent in 2007. Workers also had concerns about health care, with only 13 percent very confident they could cover future medical expenses, down from 20 percent in 2007.

Workers and retirees cited economic uncertainty, inflation and the high cost of living as reasons for their declining confidence. Many workers said they expect to delay retirement or find other work after they retire from their current jobs. Many had already lost jobs, had their wages cut, lost a big chunk of their retirement savings or had to increase their debt.

The Retirement Confidence Survey was conducted in January among 1,257 people age 25 and over using a random national telephone sample of both conventional and cellular phones. EBRI sponsored the survey with Mathew Greenwald & Associates, a District research firm.

Also troubling was that many workers were less confident that they could cover their basic expenses in retirement. Twenty-five percent this year said they could pay for the basics, down from 40 percent in 2007.

To keep up with this new reality, those who said they have lost confidence in their retirement savings said they have changed their financial behavior. Most -- 81 percent -- said they have reduced their expenses. Forty-three percent said they have changed their investing behavior. Another 38 percent said they have worked more hours or taken a second job.

In a positive sign, many have started or continue to save: 75 percent said they and/or their spouse have saved money for retirement, one of the highest levels since the institute began the survey. And another 72 percent said they have not changed their contribution to employer-sponsored retirement savings plans.