Confident Their Retirement Funds Will Materialize From ‘Someplace’

With his conviction that “something will turn up,” Dickens’ Mr. Micawber should be annointed as the patron saint of American retirement planning. The latest Retirement Confidence Survey finds 24 percent of workers “very confident” they’ll have enough money to live comfortably throughout retirement. Another 44 percent are “somewhat confident.” As in prior years, though, the report (an annual project of the Employee Benefit Research Institute, American Savings Education Council and Mathew Greenwald & Associates) says this confidence is often misplaced.

Sixty-eight percent of workers said they or their spouse have saved something for retirement. Fewer (58 percent) said they’re currently saving. Lackluster as they are, these figures mask the fact that many of the savers haven’t saved much. Apart from the equity they have in their primary residence, 45 percent of workers have less than $25,000 in total household assets. Even among those 55 and older, 29 percent have assets of less than $25,000 (excluding home equity), while just 26 percent have $100,000 or more.

Amid its data on who’s saving what, the report offers this glimpse at human nature: “Almost half of workers who have not saved for retirement indicate they are confident they will have enough money for retirement (47 percent). Asked why, their responses, taken as a whole, suggest they believe the money will come from someplace.”

One “someplace” is the worker’s employer. Fifty-two percent of workers said they or their spouse expect to receive income from a defined-benefit pension. That’s about equal to the 50 percent of current retirees who get such income. The trouble is, fewer employers still provide this sort of pension. (They kick into your 401k instead.) Thus, the number of workers who expect such income ought to be lower, particularly among younger respondents. There’s also a blind spot about Social Security and the phased-in increase in the age at which one receives full benefits: “One-third incorrectly think they will be eligible for unreduced benefits at age 65 (32 percent of all workers), but two in 10 think they will be eligible even before age 65 (21 percent).”

Some people who’ve saved little think they’ll bail themselves out by working longer than once planned. Indeed, 54 percent of workers plan to toil to 65 or older; 68 percent expect to work after they’ve formally retired. This may sound like sturdy self-reliance, but it’s as likely to be wishful thinking. The study notes that 37 percent of current retirees quit working earlier than they’d originally planned, often for involuntary reasons related to health or corporate downsizing.