Rising health care costs and the faltering economy are making consumers worry that they won’t be able to save enough for a comfortable retirement.
The Employee Benefit Research Institute’s annual survey, released Wednesday, showed the weakest worker confidence in seven years with just 61 percent saying they were “very confident” or “somewhat confident” of having enough money for retirement. That was down from 70 percent in 2007 and the poorest showing since 63 percent in 2001, when the economy was in recession.
The percentage of workers who put themselves in the “very confident” category dropped to 18 percent this year from 27 percent last year. The 9 point drop was the biggest in the survey’s 18 years history, EBRI said.
Confidence among already retired workers also fell, with just 29 percent saying this year they were “very confident” they had enough for a comfortable retirement, down from 41 percent in 2007, according to EBRI, a nonprofit group based in Washington, D.C.
Temple University business professor Jack VanDerhei, who was co-author of the study, said that workers and retirees were reacting to the many things currently hurting personal finances, from rising gas prices to the decline in home values and the drop in portfolio balances. All have led to reduced consumer spending, which may be pushing the U.S. economy into recession again.
“And, I think, more workers are beginning to factor in all the various information they’ve been given, especially the need for additional retirement funds just for the health care component,” VanDerhei said.
“The economy and health costs are major concerns,” said EBRI President Dallas Salisbury. “If there is a silver lining, it’s that Americans finally may be waking up to the realities of being able to afford retirement.”
The study again showed that most Americans are trying to save for their later years.
Some 72 percent of workers said they have saved some money toward retirement, while 64 percent are currently saving. Still, 22 percent of workers say they have no savings of any kind, the study found.
And savings balances, in many cases, remain modest.
Nearly 50 percent of workers have set aside less than $25,000 for their retirement, while 24 percent have $25,000 to $99,999, 15 percent have $100,000 to $249,999, and 12 percent have $250,000 or more. The figures do not include the values of primary residences or pensions.
Daniel J. Houston, president for retirement and investor services with the Principal Financial Group in Des Moines, Iowa, which was a sponsor of the survey, said the low savings balances were especially troubling because the current generation of workers isn’t likely to have the full array of pension and retiree health care benefits of earlier generations.
He was heartened by the increase in workers who have tried to calculate how much they need to save — 47 percent in 2008, up from 43 percent in 2007 — because it suggests they may focus on increasing retirement savings.
Workers and retirees alike expressed concerns about health care costs.
Some 22 percent of workers said they were worried about not having enough money to cover medical expenses in retirement, and 27 percent expressed concern about long-term care costs. Among retirees, 15 percent were worried about medical expenses and 28 percent about long-term care.
The study, conducted with the Mathew Greenwald & Associates research firm, involved telephone interviews with more than 1,320 individuals age 25 and older and had a sampling error margin of plus or minus 3 percentage points.