The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality showed what many retirees and soon-to-be retirees already know; many do not have sufficient savings to last them through their retirement years. This may be due to immediate more pressing financial concerns taking precedence, managing day-to-day living expenses or debt, or lack of job security. With the financial pressures of raising a family, paying for the rising costs of education and medical bills, saving for retirement can take a backseat. Only two percent of workers and four percent of current retirees believe that saving for retirement is today’s most pressing financial concern.
Managing debt can become a significant burden and stumbling block for workers trying to save for retirement. According to the study,
“55 percent of workers and 39 percent of retirees report having a problem with their level of debt.”
Emphasizing the lack of even a short-term cushion,
“only half (50 percent of workers and 52 percent of retirees) say they could definitely come up with $2,000 if an unexpected need arose within the next month.”
The study reports, “The percentage of workers confident about having enough money for a comfortable retirement is essentially unchanged from the record lows observed in 2011. While more than half express some level of confidence… 28 percent are not at all confident… and 21 percent are not too confident.” However, 13 percent of workers are very confident and 38 percent are somewhat confident about having enough money for a comfortable retirement.
Confidence in having enough savings for a comfortable retirement seems to increase with increased household income. Confidence also increases with workers who have more savings and investments, higher education, and better health. The study showed that men are more confident in their retirement savings than women, and married people are more confident than single people. Additionally, workers who participate in a defined contribution retirement plan and those who have benefits from a defined benefit plan also feel more confident than those who do not.
Many workers have defined employer sponsored retirement savings plans but are often not contributing or contributing enough to significantly impact their retirement savings. The main reason people cite for not contributing to their employer-sponsored retirement savings plan is every day cost of living expenses. Forty-one percent of eligible workers in the 2013 Retirement Confidence Survey fault basic day-to-day costs. The study goes on to say that if those not currently offered a plan were automatically enrolled in a retirement savings plan, most would contribute. Only 11 percent of those surveyed would cancel their contributions if they were enrolled in a program with a three percent deferral rate. That number jumps to 16 percent when the deferral is raised to six percent.
Workers and retirees might be uncertain about the amount they will actually need for their retirement savings. The study reports that one-third of those surveyed think they will need to save 20 percent or less of their household income, and 20 percent believe they need to save between 20 and 29 percent of their household income. Twenty-three percent of those surveyed say they need to save 30 percent or more. Finally, another 23 percent said they didn’t know how much they needed to save for retirement. Understandably, retirees, and those planning to retire in the near future, feel the need to save more.
Sadly, the percentage of retirees who are very or somewhat confident that they have saved enough and prepared well for retirement fell from 70 percent in 2007 to 51 percent in 2013. Twenty eight percent of retirees in 2013 are not at all confident about having saved enough for retirement. For many seniors who do not have enough saved to live comfortably during their retirement, a reverse mortgage loan could be a good option. A reverse mortgage loan allows homeowners to access a portion of the equity in their homes. Borrowers can receive the loan proceeds in a lump sum, monthly distribution, line of credit or a combination of these options. Borrowers must meet specific requirements such as being at least 62 years old, having sufficient equity in their home and living in the home as their primary residence. Many seniors use the loan proceeds to pay for medical bills, home upgrades, travel or basic living expenses. Depending on your financial needs, a reverse mortgage loan could be the right option for you. For more information, please call 866.751.6105