A ruthless job market, suffocating household debt and a shocking decline in the stock market have left millions of Americans feeling fragile and with little confidence they will ever have the money to retire.
Retirement confidence is at a historic low: Only 14 percent of Americans are very confident that they will be able to retire with adequate money, according to research by the Employee Benefit Research Institute. About 60 percent of workers say their household savings and investments total less than $25,000.
EBRI has been surveying retirement confidence for 22 years, and the number hasn't improved since 2009. That's when about 17 percent of workers were unemployed or underemployed, and when a 57 percent decline in the stock market left workplace 401(k) retirement savings accounts in ruins. Confidence hasn't snapped back despite improving employment numbers and a 110 percent climb in the stock market since the devastation of the 2008-09 crash.
"We were quite shocked," said EBRI research director Jack VanDerhei. He had assumed people would be more optimistic after "a fairly decent rebound" in the stock market and economy in 2010.
On the other hand, behavioral research shows that sharp losses can leave people feeling vulnerable for years. Even teens who watch families struggle through recessions doubt their control over their careers, said Antonio Spilimbergo and Paola Giuliano in a National Bureau of Economic Research paper.
EBRI also found that many people don't trust their jobs or investments to provide the money they will need for retirement. Fewer than 3 in 10 are very confident that they will have paid employment for as long as they need it. And 42 percent identify job uncertainty as an immediate concern. Only 16 percent are very confident that their investments will grow, and a mere 8 percent of workers are very confident the economy will grow at least 3 percent a year for the next 10 years.
Debt continues its stranglehold on households. Almost two-thirds of workers consider their current level of debt to be a problem.
Under the pressures of the past few years, many have used up savings, and fewer people are stashing anything away. In the recent EBRI survey, 58 percent said either they or a spouse was saving money for retirement. That's significantly less than 2009, when 65 percent were saving.
"Workers are falling further behind, and they know it," said Mathew Greenwald of Mathew Greenwald & Associates, who worked on the study with EBRI. About 67 percent say they are "behind schedule' with saving.
Now, people are more realistic, Greenwald said. But without adequate savings, they will struggle in retirement. Although that will leave many with lifestyles different than they hoped or assumed, it also leaves the nation's political leaders with a quandary. Social Security and Medicare will be more important than ever to generations that have inadequate savings. Yet, with the federal deficit looming at historic highs, there has been a push by some in government to make cuts in those programs.
Much to the surprise of the researchers, though people realize they aren't going to have enough for retirement, they are not saving more.
Rather, many say they will work longer, and 26 percent say they plan to work until 70. Also, 70 percent plan to work for pay after retiring. If they do, indeed, work longer, that could create problems for younger workers needing to find jobs if the economy continues to grow slowly.
But Greenwald said counting on working longer, or getting a job while retired, is a naive retirement plan. When EBRI surveyed current retirees, researchers found that half of them had to retire earlier than they expected because of health problems, disability or layoffs. Only 27 percent of current retirees say they have worked since retiring.