Americans Are Overestimating Their Retirement Confidence

by June 19, 2018
With the possibility of new rules on retirement funds, business reporters should tackle the topic. ("Look left, look right" image by Franck Michel via Flickr, CC BY 2.0)

Both workers and retirees are overestimating their retirement readiness, according to the Employee Benefit Research Institute (EBRI), which conducts an annual survey with the research firm Greenwald & Associates. (“Look left, look right” image by Franck Michel via Flickr, CC BY 2.0)

Nearly two-thirds (64%) of retirees polled in the 28th Retirement Confidence Survey (RCS) say they are “very or somewhat” confident about their retirement finances, up from 60% in 2016. Among workers 55 and older, confidence spikes even higher, at 71%.

These numbers may sound like good news, but they aren’t:

Both workers and retirees are overestimating their retirement readiness, according to the Employee Benefit Research Institute (EBRI), which conducts an annual survey with the research firm Greenwald & Associates.

This year’s survey, conducted online in January with roughly 2,000 participants (half still working and half already retired), found that most workers (62%) haven’t calculated how much they need to save for retirement, estimated their expenses in retirement (67%), or reviewed the benefits they can expect from Social Security (81%). The reality gap is just as pronounced among retirees. Only 17% are very confident they can afford a comfortable retirement, and nearly half (44%) say that health care costs in retirement are higher than they expected.

Business reporters can deliver real “news you can use” for their readers by developing one, or more, of the following angles of this timely story:

Look at the numbers on retirement readiness

Read the EBRI survey , and then talk to Craig Copeland or Jack VanDerhei at EBRI, or Lisa Greenwald at Greenwald & Associates. The stock market surge in 2017 may have led many to count on unrealistic returns over the long term. Talk with a few local financial planners about their experience with clients, both those still working and those already retired. Do client expectations reflect the confidence gap noted in the EBRI survey? If not, why not? What helpful advice can they offer?

Lay out the basic steps on retirement readiness

Develop a story based on the steps noted above. There’s a flood of calculators on estimating how much to save for retirement, so you can do your readers a real service by testing them all out. On calculating retirement income, you can turn to trusted sources Vanguard or T.Rowe Price, or create your own with the help of your news organization’s data-reporting staff. To estimate Social Security benefits, use this link and then talk with a local financial planner or two. How should younger workers save and invest for retirement, given the shrinking role that Social Security benefits are expected to contribute in the future? What can Millennials count on?

Get the conversation going with your readers

Use your new organization’s social media outlets to find and interview readers about their retirement readiness confidence. Assemble a group of workers and retirees, aiming for a selection that represents your area’s demographics. With workers, focus on the details of how they are saving in company-sponsored 40(k) plans or an Individual Retirement Account (IRA); for those already retired, what changes are they making to pay for increasing medical and long-term care costs, in addition to other choices (such as a job). Link to this calculator on health care costs from AARP  and be sure to include questions on health-savings accounts.