The Confused American Worker

Planning for a comfortable retirement has become one of the most significant financial objectives many Americans young and old strive to accomplish during a lifetime. Living well after leaving the workforce requires years of savings that will ultimately provide for a steady stream of income for 20, 30, or even 40 years. Unfortunately, several factors have made it more challenging for individuals to save adequately for their retirement years. With the traditional employer pension fading away, uncertainty about the availability or structure of social security retirement income, and an overall distrust of the stock market where most retirement assets are held, it is no surprise that many workers feel less than confident in their ability to retire comfortably.

The changes in the employer and government benefits landscape combined with an uncertain investment environment has created a noticeable need for sound retirement planning well in advance of leaving the world of work for good. However, recent survey statistics show there is a glaring disconnect between what American workers believe is necessary to plan sufficiently for retirement and the steps they are actively taking to get the job done.

Breaking Down the Numbers

Each year, the Employee Benefit Research Institute (EBRI) compiles survey data from workers throughout the United States regarding their retirement planning. In the 2017 Retirement Confidence Survey, the data tells a compelling story about the mindset of those preparing for retirement: six out of 10 American workers (60%) feel very or somewhat confident in their ability to have enough money for retirement, a decline from 64% in 2016. Even though more than half report a degree of confidence in meeting their retirement planning needs, only one in four workers has made an attempt to calculate the amount of money they would need to set aside now to fulfill their retirement dreams.

The separation between what the majority of workers feel about their level of confidence in planning for retirement and what is required to get there is more noticeable in additional survey responses. Nearly 32% of respondents replied that they do not have a retirement plan in place, but they still felt very to somewhat secure in their overall level of financial well-being. A surprising 67% of those workers who do not currently have a retirement plan have less than $1,000 in savings – a figure that makes it difficult to cover financial emergencies and unexpected bills without tapping into costly consumer debt. In most cases, a dismal emergency fund does not equate to financial stability, yet workers feel confident that they are financially secure.

Similarly, 45% of workers surveyed feel not too or not at all confident that they will have enough savings to fund medical expenses throughout their retirement years, and more than half feel the same about long-term care expenses as they age. Oddly enough, 56% of respondents report feeling very or somewhat confident in their preparations for retirement. Healthcare expenses are a growing concern for millions of Americans given the ever-changing landscape of insurance and government benefits available. Without having a clear plan for covering medical and long-term care expenses, a significant portion of one’s retirement plan is lacking.  

Fixing the Disconnect

The discrepancy between the level of confidence pre-retirees feel in planning for their retirement and the reality of being unprepared is clear based on the survey results, and this creates a pressing need for some degree of assistance in the realm of financial education and planning. Yet, seeking out help to create a sound retirement plan is not as common as one may assume based on survey responses. Only 24% of American workers report receiving professional advice for their financial planning needs, despite nearly three-fourths of workers believing this advice from a qualified source would be in their best interest.

Employers can take a stand in the fight against declining retirement planning confidence levels by offering financial literacy as part of a comprehensive benefits package. Through financial wellness initiatives, such as workshops geared toward retirement planning, educational material and calculators available through easily accessible sources, and one-on-one counseling or planning sessions with a financial expert, the American worker has an opportunity to be less confused as to what is necessary to plan for a comfortable, well-funded retirement. Providing financial literacy and wellness through work at little or no cost to workers is one of the simplest ways to educate pre-retirees on their options for fulfilling their retirement dream, and ultimately, fixing the disconnect between confidence in retirement planning and the realistic state of workers’ financial well-being.