Recently a reporter asked me which finding in the 2013 Retirement Confidence Survey most surprised me, before acknowledging that maybe there wasn’t anything to be surprised about in a survey that has now been conducted for nearly a quarter century.
For advisors, finding that retirement confidence is (still) at an all-time low stands out when you consider that is based on sentiments over a 23-year period. (For some other interesting RCS trendlines, click here.)
Of course, it’s also worth noting that it wasn’t that long ago (2007) when those sentiments were at an all-time high.
As it turns out, the finding that stood out most to me in this year’s RCS was the response to a new question. We have long asked about individual savings levels and how much participants think they will need to accumulate to have a financially secure retirement. But this year we also asked what percentage of total household income they thought they would need to save each year to live comfortably throughout their retirement.
Granted, the most common answer — cited by 23% — was “don’t know/refused.” But the second-most common response was … 20% to 29%.
That was an eye-opener to me, and I’m guessing to most who are reading this. Not because we see much evidence that most individuals are actually saving at that rate [1. In fact, only 8% of the 2013 RCS worker respondents cited as a target the 0%-8% that many industry surveys suggest is the most common savings rate (though that often doesn’t take into account the impact of the employer match).] — but it does at least suggest that individuals are beginning to take seriously the amount of savings that might be required.
On the other hand, one RCS finding which never ceases to surprise me is the percentage of workers who say that they have ever tried to calculate how much they need to save for a comfortable retirement. This year 46% had done so. While that’s less than half, it was higher than we’ve seen the past couple of years, and better than we’ve seen in most of the years since 1999 in which we’ve asked that question. (The all-time high was 53% in 2000.)
Muting the positive message that trend might imply was the reality that those calculations often aren’t a sophisticated undertaking. Indeed, workers often guess at how much they will need to accumulate (this year 45% said they guess), rather than doing a systematic retirement needs calculation. Eighteen percent indicated that they did their own estimate and another 18% asked a financial advisor, while 8% used an on-line calculator. Another 8% merely read or heard how much was needed.
All this raises the following question: Were the savings projections so high because so many workers didn’t do a savings needs calculation — or did participants avoid doing a savings needs calculation because they thought the results would be too high?
In either event, it’s likely that their retirement confidence — and their savings goals — would be well-served by taking the time to do an actual assessment. Here’s hoping the release of this year’s Retirement Confidence Survey inspires them to do just that.
Footnotes
