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EBRI: Challenges Aside, Retirement Confidence Remains High

Industry Trends and Research

Despite the pandemic and inflation, American workers and retirees remain optimistic about living a comfortable retirement—and one key factor that has helped is having a workplace retirement savings plan.

This is according to the 32nd annual Retirement Confidence Survey (RCS) measuring worker and retirement confidence conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research. In fact, in 2022, 82% of workers who are offered a workplace retirement savings plan are satisfied with it—a finding that has remained steady from 2021. Moreover, the same high share of plan participants say they are satisfied with the investment options available. These are important findings given that workers (82%) remain more likely than current retirees (47%) to expect their workplace DC plan to be a source of income in retirement. 

Similarly, about 8 in 10 respondents report being satisfied with the tools and resources available through their plan for both determining how much to save and determining how to generate income from their retirement savings. In addition, 6 in 10 plan participants say they have received information estimating how much monthly income their plan savings might be able to generate. 

One caveat is that some admit they do not fully understand some of the more common options available. For example, a third say they do not understand managed accounts, half do not understand ESG investment options, and 4 in 10 indicate they do not understand target date funds (TDFs), the survey found. 

When asked about preferred improvements in retirement savings plans, Craig Copeland, EBRI’s director of Wealth Benefits Research, explained that respondents’ top choices were:

  • better explanations for how much income their savings will produce in retirement;
  • options that provide guaranteed lifetime income; and 
  • better explanations for whether they are on track with retirement savings. 

Just under 3 in 10 cited each of these as the most valuable improvements in plans. These were followed closely by having more options designed for after they retire and more investment options being available. 

Given the positive findings, it is somewhat surprising to see that many Americans report not knowing where to go or who to trust for financial and retirement planning information. Here, the survey found that almost 4 in 10 workers and 2 in 10 retirees say they do not know who to go to for financial and retirement planning advice. Many turn to nonprofessional sources, like family and friends (35% of workers and 21% of retirees) or go online to do their own research (29% of workers and 23% of retirees).

The Pandemic, Inflation and Overall Confidence

Meanwhile, overall confidence level was essentially unchanged from 2021, but the pandemic and inflation appear to be creeping into the underlying findings. 

Here, the survey found that roughly 7 in 10 workers report that they are at least somewhat confident, including almost 3 in 10 who are very confident they will have enough money to live comfortably throughout retirement. The same holds true for retirees, with nearly 8 in 10 saying they are confident, including one in three who are very confident. Consequently, confidence levels have held at, or just below, their all-time highs, even with the pandemic.

That said, even as the effects of the pandemic abated this year, a third of workers and nearly a quarter of retirees still say it has made them less confident in their retirement prospects. In addition, a third of workers and half of retirees who feel less confident cite inflation and the cost of living as the reason for their declining retirement confidence. 

Debt is also an increasing challenge. Nearly half of workers say debt has negatively impacted their ability to save for retirement. More so than last year, over one in four retirees say debt has affected their ability to live comfortably in retirement.

In contrast, roughly 7 in 10 workers and retirees overall report being confident they will have enough money to keep up with inflation in retirement. What’s more, nearly three-quarters of retirees who feel more confident in their ability to live comfortably through retirement since COVID report that it was due to having money in savings or having good investments.

“Even with the concerns of the pandemic and rising prices, overall, American workers and retirees still feel positive about their retirements,” said Copeland. “The Americans who are more likely to feel that their futures appear grim since the pandemic are those who were already pessimistic about their futures, due to lower incomes, problems with debt or lower health status.”

Prioritizing Retirement Savings

While many believe their household’s long-term financial needs are different from others, most Americans prioritize retirement savings and investments. In this case, 6 in 10 workers and a third of retirees confirm that “saving and investing for retirement” is among their top three longer-term financial goals. In comparison, “planning for future health and long-term-care needs” is a top priority for half of retirees and more than a third of workers. And among both workers and retirees, about 3 in 10 say developing a strategy for drawing retirement income is a top-three goal. 

Workers also envision a gradual transition to retirement and retirement funding that includes work for pay—but that does not match the experience of most retirees, the study notes. The median expected retirement age for workers (age 65) and the reported retirement age of retirees (age 62) remain unchanged. Though down from last year, the survey found that 4 in 10 workers expect to gradually transition into retirement, yet only 17% of retirees report having a gradual transition, while 73% say their retirement was a full-time stop. 

Higher Spending?

Retirees further reveal that their lifestyle and spending in retirement, for the most part, are as expected, but slightly more than a third suggest that spending is higher than expected. This is an increase in those reporting higher spending, compared with a quarter who reported higher expenses in 2021. In addition, a larger share of retirees suggest spending on housing is higher than expected and more indicate that spending on travel and leisure are higher than expected.
“This could reflect increased use and desire for travel and leisure as the pandemic lulls. It can also reflect inflation and the increased cost of travel and entertainment for some,” said Lisa Greenwald, CEO of Greenwald Research. “While it is hard to know which reason is driving the higher expenses, a strong majority of retirees still feel their retirement lifestyle and spending are on track.” 

The survey of 2,677 Americans ages 25 or older—including 1,545 workers and 1,132 retirees—was conducted online from Jan. 4–26, 2022. This year, the survey included an oversample of roughly 807 completed surveys among LGBTQ individuals; these findings will be released in June.