Survey results among current retirees showed an even greater increase, with 82% reporting they are either very or somewhat confident about having enough money to live comfortably in their retirement years – up from 75% in 2018. Clearly, current retirees are more confident than those still in the workforce.
But what are the causes of this increased confidence?
According to the survey, a key factor among workers is access – or lack of access – to an employer retirement plan, an IRA, or a pension. Those with access to such options are nearly twice as likely to be confident about retirement (74% with a plan, 39% without.)
Not surprisingly, a big consideration for both workers and retirees is their perceived ability to cover basic expenses and medical care during their retirement years. The survey indicates retirees are more confident than workers. Some 85% of retirees report they are very or somewhat confident about being able to afford basic expenses in retirement, compared with 72% of workers. And, 80% of retirees express confidence in the ability to handle medical expenses versus 60% for workers.
However, confidence for both workers and retirees drops sharply when considering the ability to cover potential long-term care needs. In this case, 41% of retirees and 49% of workers are NOT confident.
The concern over health care expenses is consistent with what is frequently expressed by our clients at Thorley Wealth Management, and it is a critically important part of a good financial plan.
The survey also consistently indicates a direct relationship between debt levels and retirement confidence. In 2019, 41% of workers with a major debt problem said they are very or somewhat confident about having enough money to live comfortably in retirement, compared with 85% of workers who indicate debt is not a problem.
Although overall household debt levels have dropped significantly since the financial crisis of 2008, many workers approaching retirement today are more likely to have mortgages or student loan debt.
I can identify three clear factors by which people can increase their confidence as they approach retirement.
• Participate in an employee retirement plan if available
• Work to remain debt-free
• If available, contribute to a Health Savings Account. This can be a means of saving to cover health expenses in retirement.