Retirement finance worries increase for Americans

The Employee Benefit Research Institute and Greenwald Research have published their 33^rd Annual Retirement Confidence Survey, and it’s got some interesting results. The survey measures worker and retiree confidence about their finances in retirement and was conducted earlier this year from a representative sample of about 2,600 Americans.

Top-line findings include that optimism about having enough money to retire on is declining. Compared with 2022, both workers’ and retirees’ confidence have significantly dropped and returned to levels last seen in 2018. The last time we saw a decline in confidence this big was in 2008 during the global financial crisis. Sixty-four percent of workers feel at least somewhat confident that they will have enough money to live comfortably throughout retirement, with only 18% feeling very confident. While retirees’ confidence is slightly higher than workers’, less than three-quarters feel at least somewhat confident, with only 27% feeling very confident.

Among those who do not feel confident, 4 in 10 workers and a quarter of retirees state it is due to having little to no savings. Inflation also has a large impact on Americans’ optimism, with 29% of workers and 42% of retirees stating this is the reason for their lack of confidence.

On a positive note, more than 4 in 5 Americans feel knowledgeable about managing their day-to-day finances and 7 in 10 feel knowledgeable about managing savings and investments. Despite that, however, many workers feel debt levels are negatively impacting their ability to save for retirement.

Over 6 in 10 workers report their debt is a problem, a significant rise this year. Nearly half of workers and a quarter of retirees agree debt is negatively impacting their ability to save for or live comfortably in retirement. Additionally, half of workers and one-third of retirees believe their non-mortgage debt is having a negative impact on their ability to save for emergencies.

When it comes to savings that have already been set aside, cyclical market dynamics might be part of the problem. Forty percent of workers and 58% of retirees report that their retirement account balances have decreased over the past 12 months. Significantly more workers this year switched to more conservative investments in their workplace retirement plan, perhaps because 74% of them worry that the stock market will be increasingly volatile and unpredictable going forward.

When it comes to the government portion of retirement security, there is also skepticism. It’s been a common concern practically my entire lifetime that Social Security isn’t being administered in a sustainable way and that it would someday be unable to pay promised retirement benefits. Young Americans have been rolling their eyes for at least two generations at the idea that Social Security can actually be depended on into the far future.

This year’s Retirement Confidence Survey finds that only half of current workers feel at least somewhat confident that Social Security benefits will continue to be of at least equal in value to the benefits provided today. Retirees, most of whom are presumably already receiving benefits, are somewhat more confident in the system.

Americans clearly have legitimate concerns about their ability to enjoy a comfortable retirement, with some of those concerns affected by government policy and some of them affected mostly by their own ability to stay employed and decisions to save for the future rather than spend today. A government that keeps taxes low, fosters economic growth, and protects the value of the dollar from being eroded by inflation will go a long way toward creating a stronger financial tomorrow for all Americans.

But everyone out there who expects to retire still has a lot of work to do themselves to set aside money for the future and make wise investments. Ironically, skepticism about the future viability of the Social Security and Medicare trust funds may be one of biggest motivating factors in getting Americans to grow their own retirement accounts.

We also covered this topic in Episode 19 of the Free the Economy podcast; the retirement finance segment starts around 7:34 in.