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5 Ways To Boost Retirement Confidence (and 1 You Can’t Control)

Industry Trends and Research

The 2019 Retirement Confidence Survey (RCS) found a continued increase in retirement confidence – but some were more likely to be confident than others. 

Confidence about retirement is one thing, of course, and preparation something else, though the two are logically intertwined. That said, for those looking to shore up confidence levels, data from the granddaddy of such surveys the non-partisan Employee Benefit Research Institute’s (EBRI) Retirement Confidence Survey – provides a roadmap for building retirement confidence. Based on those findings, you should:

1. Work for an employer that offers a retirement plan.

Data indicates that workers – even workers of modest means – are 12 times more likely to save for retirement if they have access to a retirement plan at work than those who don’t have that option. And in fact, this year’s RCS found that workers who have any retirement plan were dramatically more likely than those who do not have such a plan to report that they or their spouse have saved any money for retirement (79% vs. 17%), and to say they or their spouse are currently saving for retirement (75% vs. 12% among those without a plan).

It is therefore not surprising then that in recent years, the RCS has tracked a huge gap in confidence about retirement between those who have a retirement plan and those who don’t; in the 2019 RCS, workers reporting they or their spouse have money in a DC plan or IRA or have benefits in a DB plan from a current or previous employer were more than twice as likely as those without any of these plans to be at least somewhat confident (74% with a plan vs. 39% without a plan).

Furthermore, among those with a plan, the percentage of those who are very confident increased from 14% in 2013 to 28% in 2015 to 26% in the most recent RCS. In contrast, the percentage of those who are very confident remained statistically unchanged among those without a plan (10% in 2013, 9% in 2014 and 12% in 2015 and still 12% in 2019).

2. Figure out how much you’ll need.

Just 4 in 10 workers (42%) report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement – and while that number has been remarkably consistent over the years, workers reporting that they or their spouse participate in a retirement plan were significantly more likely than those who do not participate in such a plan to have tried a calculation (50% vs. 12%).

Prior versions of the RCS have found that despite higher savings goals, workers who have done a retirement savings needs calculation are more likely to feel very confident about affording a comfortable retirement (33% vs. 12% who have not done a calculation in 2016). 

In other words, while many have (or had) a retirement plan, they don’t seem to have a plan for retirement.

3. Manage your debt.

The RCS has consistently found a relationship between debt levels and retirement confidence. In 2019, (just) 41 % of workers with a major debt problem were either very or somewhat confident about having enough money to live comfortably in retirement, compared with 85% of workers who said that debt is not a problem. 

On the other hand, a third of workers with a major debt problem are not at all confident about having enough money for a financially secure retirement, compared with (just) 5% of workers without a debt problem.

4. Retire

One might expect that the financial realities of being in retirement might well challenge, if not shake, the levels of confidence expressed ahead of crossing that threshold – and yet the RCS has consistently chronicled a higher degree of retirement confidence among those already in retirement than among those still working. In the 2015 RCS, 37% of retirees were very confident about having enough money to live comfortably throughout their retirement years (up from 28% in 2014 and 18% in 2013), and a third were somewhat confident. 

Indeed, in this year’s RCS 82% of retirees report feeling either very (35%) or somewhat confident about having enough money to live comfortably throughout their retirement years (compared with 75% a year ago).

This is despite a consistent finding that individuals are frequently forced to leave the workforce earlier than planned (43% did in the 2019 RCS), and that they are less likely to work in retirement than pre-retirees anticipated. Many who retired earlier than planned did so because of a hardship, such as a health problem or disability (35%), while a third (35%) retired due to changes at their company. Still another third (33%) said they could afford to retire earlier.

However, as one might expect, workers who are not confident about their financial security in retirement plan to retire later, on average, than those who express confidence. For example, 64% of workers who are not confident in their retirement financial prospects say they either will not retire or do not know when they will retire (compared with 27% who are very confident).

5. Work with an advisor.

In the 2015 RCS, more than three-quarters (78%) of respondents who had talked with a professional financial advisor about retirement planning were either somewhat or very confident that they will have enough money to live comfortably throughout their retirement years, far more than the 49% who did not use an advisor. The 2013 RCS found that nearly two-thirds (65%) of those who used either online calculators or asked the advice of financial advisors were either somewhat confident or very confident that they will have enough money to live comfortably through their retirement years.

On the other hand, nearly half (44.6%) of those who simply guessed were also somewhat confident or very confident.

6. Don’t be a Gen Xer

This one is admittedly a bit tongue-in-cheek, but according to EBRI’s 2019 Gen X RCS Report, Generation X workers were the least likely to say that they are confident in having enough money to be able to live comfortably throughout retirement, with (just) 59% saying they are somewhat or very confident in doing so, compared with two out of three workers in the other generations. In addition, Gen X workers report the lowest or match the lowest levels of confidence across many measures with regard to retirement, including:

  • being able to afford the same lifestyle in retirement; 
  • having enough money to last their entire life;
  • doing a good job preparing for retirement; and 
  • being able to cover basic expenses, medical expenses, or long-term care expenses.

Generation X workers were also the least likely, or equal to the least likely, to have confidence in their ability to manage their finances in retirement. 

Of course, unlike the other attributes here, it’s not exactly a choice. But then, if you are attentive to the other five steps, who’s to say your readiness, not to mention your confidence, won’t climb as well?

What Matters

Ultimately, retirement confidence, like confidence generally, is a state of mind, and one not always grounded in an accurate assessment of reality. As noted above, the mere act of guessing about retirement needs seems to be enough to provide a boost in confidence, certainly in the short run.

Regardless, it’s hard to deny that the best, most certain, means of assuring retirement confidence is establishing a solid foundation for that belief by: 

  • having the opportunity to save in a workplace retirement plan; 
  • taking advantage of the opportunity to save; 
  • establishing a goal and revisiting that goal on a regular basis; and 
  • enlisting the help of professionals in establishing those goals and in making sound, diversified investments.

What really matters, after all, is not your level of confidence about retirement, but your level of retirement preparation.