Health Expenses and Debt Are Concerns for Planning for Retirement

Two in three workers (65%) report feeling very or somewhat confident about being able to afford basic expenses in retirement, including 26% who feel very confident, according to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey (RCS).

Workers’ confidence in their ability to afford basic expenses is higher than the confidence they report regarding their ability to pay for medical expenses in retirement. Forty-five percent of workers are not too or not at all confident they will have enough money for medical expenses in retirement. An even greater share is not too or not at all are confident in their ability to pay for long-term care expenses: nearly six in 10 (57%) do not feel confident about having enough money for long-term care in retirement.

“Workers with a retirement plan are more likely to have confidence in paying for expenses in retirement. This is because they save more,” Stephen Blakely, editor and communications director for EBRI, said in a media call.

Retirees, who are already in that life stage, express higher levels of confidence than workers in each of these financial aspects of retirement. More than four out of five retirees (85%) feel at least somewhat confident in their ability to afford basic expenses throughout their retirement years. Three in four (77%) are very or somewhat confident about having enough money to cover medical expenses, and 55% feel very or somewhat confident in their ability to pay for long-term care.

In addition, workers are more likely to say that debt is a problem for them than retirees. Nearly three in five workers (59%) say debt is a problem for them, while 40% say debt is not a problem. In contrast, just 36% of retirees say that debt is a problem for them. Workers are twice as likely to say that debt is a major problem as retirees (18% versus 9%).

The RCS has consistently found a relationship between debt levels and retirement confidence. In 2017, just 4% of those with a major debt problem say they are very confident about having enough money to live comfortably in retirement, compared with 31% of workers who indicate debt is not a problem. On the other hand, 36% of workers with a major debt problem are not at all confident about having enough money for a financially secure retirement, compared with 8% of workers without a debt problem.

The RCS found that just 37% of workers say they are very or somewhat confident that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today, including just 6% who are very confident. One in five workers (20%) are not at all confident.

Confidence that Social Security will continue to provide benefits that are at least equal to today’s value is higher among workers ages 55 or older than among younger workers, and retirees are more likely than workers overall of any age to be confident about the future value of Social Security benefits. Half of retirees (51%) say they are confident about the future value of Social Security benefits, including 13% who are very confident.

Today’s workers are almost half as likely to expect Social Security to be a major source of income in retirement (35%) as today’s retirees are to report that Social Security is currently a major source of income (61%). However, roughly nine in 10 workers and retirees both expect/report that Social Security will be/is a source of income in retirement, whether as a major source or minor source of income.

Worker confidence in maintaining Medicare’s current level of benefits in the future is also low. Just 38% of workers say they are very or somewhat confident that the Medicare system will continue to provide benefits of at least equal value to the benefits received by retirees today, and only 5% are very confident. One in six (17%) are not at all confident in future Medicare benefits.

Like views of Social Security, worker confidence about the future value of Medicare benefits is higher among those ages 55 and older, and retirees are more likely than workers overall of any age group to be confident. Even so, just 8% of retirees say they are very confident in the value of the future benefits paid by Medicare, but 44% are somewhat confident.

The survey was conducted from January 6, 2017, to January 13, 2017, through online interviews with 1,671 individuals (1,082 workers and 589 retirees) ages 25 and older in the United States. RCS results and fact sheets may be found at https://www.ebri.org/surveys/rcs/2017/.