Reason ‘Able’

By Nevin Adams • March 25, 2016 • 0 Comments
Having written about the Retirement Confidence Survey for more than half of its 26-year existence, and having had an opportunity to be involved “behind the scenes” of its preparation for three of those, I can pretty well assure you that the resilience in confidence won’t be the focus of most of the coverage.

Indeed, even the press release announcing the survey describes the confidence levels as “stable” and the current state of retirement confidence as having “plateaued,” even though not only did the “very confident” group hold its own (21% versus 22% in 2015), but there were increases in those somewhat confident (from 36% a year ago to 42%) and decreases in those not at all confident (from 24% to 19%).

One might well slough those movements off to a strong stock market (while not directly correlated, the trend lines in retirement confidence have seemed to track with major market movements) — at least until you consider that in the time period the survey was taken (January-early February 2016) wasn’t a great period for the markets, following what was a pretty disappointing year, even if those Dec. 31 statements hadn’t yet arrived. Stable confidence in the presence of such economic headwinds might even be considered newsworthy by some.

And yet, I would expect that the thing that most will take from this RCS, as they have for the past several years, is how few have saved $1,000. It’s a jaw-dropping stat — more than a quarter (okay, just a bit more than a quarter — 26%) have less than $1,000 saved. Of course, fewer than 1 in 10 who have a retirement plan (DB, DC, or IRA) are in that category — and there’s no accounting for age/work tenure in that number (should we be shocked that a 25-year-old, with all the financial burdens of setting up a life and paying down college debt, hasn’t yet accumulated very much?) — but the headline is compelling, and the message attention-grabbing: “We’re in Really Big Trouble” or words to that effect.

Indeed we may be in trouble, based on the other findings in the survey. Most respondents still haven’t tried to figure out what they need, and many of those who have, just guessed; people still expect to work in retirement, even though most retirees don’t. And while one might think that they are simply counting on Social Security (a primary source for many of today’s retirees), fewer than 10% of current workers are very confident that that system will pay out benefits at least equal to what it pays today, and a third (32%) are not at all confident of that result (though it’s higher among those 55 and older). Do they simply plan to die young? Apparently not: 37% of current workers say it’s very likely they’ll live to at least age 85, and another 36% consider it somewhat likely.

They do seem to have a sense that they have some catching up to do; one in five of those with a retirement plan say they’ll need to save 20% to 29% of their income in order to live comfortably through retirement, and about as many (19%) of those with no retirement plan say they’ll need to save 50% or more to achieve that level of comfort. However, respondents have provided those kind of estimates before, with little subsequent action apparent in remedying those circumstances. The reality is that, setting aside the well-documented potential issues with relying on information that is “self-reported,” without knowing individual factors like age or income, it’s nearly impossible to discern whether those amounts are woefully inadequate, or reasonable, however they strike us at first glance.

It would be nice if all the retirement savers out there — and those who cover the RCS — would view it as a call to action, drawing from its findings the impetus to reach out to an advisor, to check out their provider’s online calculators — or even just give some thought to how much they might need for retirement — and then of course start saving, or start saving more.

Not because they would feel more confident, though the RCS would suggest that undertaking those actions — any, and certainly all, of them — would do just that.

No, it would be nice if they did so because if they did any — or certainly all — of those things, they’d almost certainly have a reason to be more confident.