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Fewer of Us Save, More Are Confident of Retirement. Are We Crazy?

New survey is studded with striking facts about Americans' finances, dreams, and desperation.

The retirement confidence of Americans has come a long way since the recession. The percentage of workers either very or somewhat confident that they will be able to afford a comfortable retirement now stands at 63 percent, up from 51 percent three years ago and 49 percent in 2011. 

QuickTake The Gap in America’s Retirement Plan

But it isn't because of a surge in the number of people who are saving, according to the 26th annual Retirement Confidence Survey released today by the nonprofit Employee Benefit Research Institute (EBRI). 

The percentage of workers saying they or their spouse saved for retirement is 69 percent in 2016, down from 75 percent in 2009. That number has bounced around a lot, between 57 percent in 1994 to as high as 78 percent in 2000. Whatever the reason for the significant decline this year, it's bad news for our retirement prospects—as is the fact that fewer than half of workers (48 percent) have even tried to figure out how much money they'll need to live on in retirement.

"We've seen a decent amount of awareness around retirement issues, but the issue is whether that awareness translates into different behavior," said Luke Vandermillen, vice president of Retirement and Income Solutions with Principal Financial Group, a retirement services provider and one of the longtime underwriters of the survey. 

One likely force behind some of the rise in overall confidence: the housing market. A recent Federal Reserve report showed that since the market hit a low in early 2009, the value of homeowners’ equity has more than doubled.

Ownership of homes is much wider than ownership of stocks and acts as a "kind of stealth offset to falling stock prices," said Ian Richardson, chief economist at Pantheon Macroeconomics, in this recent Bloomberg story.

Here are some highlights from the EBRI report. 

Confidence means having a retirement plan at work 

Workers with a retirement plan contributed the most to the higher overall confidence numbers. Many of the “very confident” have, or have a spouse who has, a defined contribution plan, an IRA or a defined benefit plan from a current or previous employer. Twenty-six percent of workers with such savings plans were “very confident” about being able to afford retirement, compared with 10 percent of those who don't have accounts. 

People without any of those options were more confident, too. The percentage of workers without a plan who said they were “somewhat confident” rose from 21 percent last year to 29 percent this year. One possible reason is a decrease in the unemployment rate, Vandermillen said.

Still, there's a big savings gap between those with access to a retirement plan and those without: 34 percent of respondents with a retirement plan who answered a survey question about savings said they had saved at least $100,000. Just five percent of those without a plan said they'd saved that much. Only 9 percent of workers with access to a retirement plan reported savings of $1,000 or less; it was 67 percent for those without a plan.  

What a nice retirement will cost, as a percentage of income 

Workers were asked to estimate what percent of household income they'd need to save annually, from 2016 until they retire, to have a comfortable retirement. This year, far fewer people said they don't know—22 percent, down from 27 percent last year.

The largest chunk of workers surveyed, at 17 percent, said they'd need to save 20 to 29 percent of annual income. That's down from the 19 percent who said the same thing in 2015—which was down from 22 percent in 2014.

At the extreme end of what people think they need to save for old age, 19 percent of workers who have no access to a retirement plan estimate they'd need to save at least 50 percent of their income annually. Among those with a retirement account, 9 percent said they'd need to save half their income.

Four percent of respondents said they actually managed to save 50 percent of their income last year. The largest chunk of respondents (27 percent) said they'd saved under 10 percent of income. 

What all that saving needs to add up to in dollars 

A nest egg of half a million dollars or more is what 46 percent of workers think they'll need to retire comfortably. Twenty-six percent think they will need less than $250,000. Those who have actually tried to calculate how much they need set higher goals. This year, 31 percent of workers who have made that effort figured they needed at least $1 million for retirement. Among those who haven't thought it through, 18 percent estimated they'd need at least that much.

In a charming testament to human nature, while not enough people are saving for retirement, they're definitely thinking about what they'll do when they retire. Sixty-seven percent of workers said they had thought about how to occupy their time. Just 36 percent said they had talked with a financial adviser about retirement planning.

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