An improving economy and big stock market gains in 2013 made some people look at their retirement planning more positively, according to the 24th annual survey of retirement confidence from the Employee Benefit Research Institute, or EBRI.
More than half -- 55 percent -- of workers are now either very confident or somewhat confident that they'll have enough money to live comfortably in retirement. That's up about 4 percentage points from last year, mostly among workers who say they now are feeling very confident. That percentage went from 13 percent in 2013 to 18 percent this year.
A good income improves people's outlook. Among people with household incomes higher than $75,000 a year, 82 percent are somewhat or very confident that they'll be comfortable in retirement. Among those with household incomes less than $35,000, 31 percent are somewhat or very confident that they'll be comfortable.
Jack VanDerhei, EBRI's research director and co-author of the report, says he hopes affluent people aren't over confident. "It was a good year for those invested in equities," he says. "Many of the people who were invested in a defined contribution plan saw significant gains in 2013, but among the behavior problems in individual decision-making is the tendency to extrapolate excessively about future gains based on one good year."
Working longer may not work
When they are feeling nervous about retirement, many people's answer is to decide to work longer, say researchers. The percentage of workers who expect to retire after age 65 has risen from 11 percent in 1991 to 33 percent in 2014.
While this sounds like a plan, for many people it probably won't work, the report suggests. While only 9 percent of workers say they plan to retire before age 60, 35 percent of retirees say they actually retired that early -- because they lost their jobs or had poor health. About 18 percent of workers predict that they'll retire between the ages of 60 and 64, but far more -- 32 percent -- actually hang up their work boots when they are in that age range. And while 22 percent of workers say they are going to wait until age 70 to quit, only 9 percent of current retirees actually did so.
Why are so many people undisciplined about retirement planning? Matt Greenwald of Greenwald & Associates, which conducted the survey, offers five answers:
- "It is easier to just decide to work longer than it is to figure out a disciplined approach.
- "Many people are seeing their expenses rise while their income isn't.
- "There's a lot of wishful thinking that the economy is going to get better and return to the way it was in 2005 and 2006.
- "Today, there's less of a culture of thrift. People have a hard time finding the discipline to save.
- "People tend to devalue the future. They like to believe that it will all work out in the end."
It boils down to this: Saving for retirement is boring and hard. The payoff, especially when you are younger than 50, doesn't seem very clear. But like it or not, we're all going to get old -- it's better than the alternative -- and being old and comfortable is a lot better than being old and poor. So keep saving.