Ways to Increase Retirement Savers’ Confidence

The 2018 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI) revealed retirees’ confidence in their ability to live comfortably in retirement remains higher than employees’ confidence, with 32% of retirees very confident and 44% somewhat confident.

However, retirees are less likely than last year to feel confident in their ability to handle basic expenses and feel less confident in their ability to handle medical expenses.

In addition, as fewer employees plan to rely on defined benefit (DB) plans for retirement income and fewer trust that Social Security will be there for them, the RCS found many employees are showing interest in guaranteed income products.

During a media call about the RCS, Lisa Greenwald of Greenwald & Associates said, “While overall confidence is statistically unchanged over last year, confidence in specific factors are lower.”

Craig Copeland, EBRI senior research associate, pointed out that defined contribution (DC) plan ownership is an important factor in Americans’ confidence in the ability to live comfortably in retirement. The RCS found 76% with a DC plan are confident versus 46% without a DC plan. However, four in ten survey respondents say debt affects their ability to save for retirement.

Asked what plan sponsors and advisers can do to improve Americans’ retirement confidence, Copeland said helping them calculate how much overall will be needed to cover expenses in retirement is important. Plan sponsors should offer participants access to financial advisers.

In addition, financial wellbeing programs—including debt counseling—can improve retirement confidence, Copeland said.

He pointed out that plan sponsors are still not embracing in-plan guaranteed lifetime income products due to fiduciary fears; they are not sure what fiduciary due diligence is needed. He also noted that annuities have gotten a bad rap in the media. However, Copeland feels adoption of in-plan products may increase as participant balances grow higher.

Greenwald added that estimating and planning for health care costs is a critical element in retirement planning. The RCS found that, even among near retirees, fewer than half have done this calculation. Seven in 10 employed workers and six in 10 employed retirees say workplace education on health care planning for retirement would be helpful. Greenwald said employers and advisers need to help participants plan for health care costs.

She also said the findings speak to a growing role for health savings accounts (HSAs) in saving for retirement and employees investing their HSA dollars.