A new survey illustrates key differences between what workers perceive their most significant sources of income will be in retirement and which sources retirees have found to be the most significant.
The Employee Benefits Research Institute’s 2018 Retirement Confidence Survey explores the retirement outlook of both workers and retirees.
“Retirees continue to be more confident in their retirement security than workers,” noted Craig Copeland, EBRI senior research associate and co-author of the survey report. “Just 17% of American workers say they are very confident in their ability to live comfortably throughout retirement, compared with nearly a third of retirees who say that are very confident.”
However, retiree confidence in having enough money to cover basic expenses and medical expenses dropped in the latest findings: 80% say they were very/somewhat confident about covering basic expenses this year compared to 85% in 2017. And 70% say they are very/somewhat confident about covering medical expenses this year vs. 77% in 2017.
“Health care expenses in retirement appear to be playing a notable role in retirees’ confidence. Retirees are less confident in being able to afford medical expenses and the share very confident in affording longterm care also declined,” said Lisa Greenwald, executive vice president of Greenwald & Associates, and co-author of the report. “Half of retirees say they didn’t even try to calculate health expenses before retirement, and more than four in ten retirees say their health care expenses are higher than they expected. However, those that did the calculation are less likely to report health is costing them more than expected.”
Meanwhile, workers are more likely to believe that income from work will be a significant source of income in retirement than retirees say they are actually experiencing: 68% of workers expect income from working to be either a major or a minor source of income in retirement, but just 26% of retirees say that this income is a major or minor source, according to the survey press release.
Workers have the opposite expectation of Social Security versus what retirees are experiencing: 36% of workers expect Social Security to be a major source of retirement income, but 67% of retirees report that Social Security is a major source of income in retirement.
As explained by the survey press release, retirees’ confidence that Medicare and Social Security will continue to provide benefits equal to what they are currently providing significantly declined compared to 2017: 46% reported they were very or somewhat confident in Medicare this year, down from 52% in 2017, while 45% were very or somewhat confident in Social Security, down from 51% in 2017.
Eight in ten workers (81%) say they expect that a workplace retirement savings plan, such as a 401(k) or 403(b), will be a major or minor source of income, but only 52% of retirees report that a savings plan is a significant source of income for them.
The press release noted that those with a defined contribution (DC) plan like a 401(k) are far more likely to say they are confident in their ability to live comfortably in retirement: 76% of workers with a DC plan are at least somewhat confident in their ability to live comfortably in retirement versus 46% of those without a DC plan.
For full survey results, visit EBRI.org