Americans are doing more to prepare for retirement but feel less confident they’ll actually be ready for it.
That’s one of the key findings from new reports examining the financial outlook of workers and retirees. Despite increasing contributions to retirement accounts and nearing experts’ recommended savings targets, confidence in having enough money to live comfortably in retirement continues to slide.
What’s behind the growing anxiety? Inflation remains a concern, while retirees are increasingly worried about potential changes to Social Security and Medicare. At the same time, more workers are borrowing from their 401(k)s or taking hardship withdrawals, a sign that some households may be struggling to keep up with day-to-day expenses.
We spoke with CBS News Business Analyst Jill Schlesinger about why retirement confidence is falling and what the latest data says about Americans’ financial preparedness.
Here’s the full transcript of the interview:
WKMG-TV: There’s good news and bad news on the state of retirement. Americans are saving more for the future but are anxious about their ability to do enough. CBS News Business Analyst Jill Schlesinger is here to break down the data.
Hey Jill, what is the state of retirement confidence these days?
Jill Schlesinger: Well, we’ve got a report from the Employee Benefit Research Institute. Every year they go out and they try to measure our confidence in having enough money to live comfortably in retirement. Comfortably is however you define comfortable.
Among workers, the number fell to 61 percent. It’s down by six percentage points from a year ago, 11 percentage points from five years ago, so a real drop-off.
When they asked the same question to folks who are already retired, that confidence level slid to 73 percent, down five percent from a year ago, seven from five years ago.
Obviously, both groups are pretty stressed out about inflation over the last year, but it’s retirees who say they’re worried about potential policy changes to Medicare and Social Security.
WKMG-TV: Jill, separately, a report from Fidelity shows progress. Is this another case of people feeling bad but doing well?
Jill Schlesinger: Well, I mean, it’s interesting because if you feel bad, right, you say to yourself, “Oh my gosh, I have to do more.” So maybe this is the way that we actually try to make ourselves feel better with good action.
So Fidelity finds that when they look at their 401k plans, the total savings rate, workers’ contributions, employers’ matches, are up to 14.4%. That’s just shy of what most experts recommend as a 15% target.
Whether this is kind of like a smoke screen, like, “Oh, I feel bad, but I’m very happy the market’s up,” I think that there are some warning signs inside of this report.
We should pay attention to this.
The number of folks who are taking a 401k loan has climbed to 19.2%. Hardship withdrawals are up to 2.5%. I don’t think these are big, blaring, worrisome trends yet, but it does indicate that a lot of people using these plans are in financial distress.
Just as a reminder, gang, I just want to say that, please: tapping your retirement assets, it should be a last resort. It’s so hard to get the money in – once you take it out, what we find is, it’s much more difficult to pay yourself back.
WKMG-TV: Good advice. Jill, thank you so much.
You can see Jill regularly on CBS Mornings and the CBS Evening News. For more analysis, go to JillOnMoney.com.