This Just Doesn’t Make Sense!

The WSJ does a good job of publishing the occasional personal finance article as they’ve done today with an update on the Employee Benefit Research Institute’s (EBRI) annual survey. Today’s article, titled “Retirees Are Less Confident About Having Enough to Live On” highlights declining optimism as a result of fears that medical expenses will be greater in retirement than they had expected.

However, the “decline” in optimism is only 5% from 85% to the current 80%. Now, I don’t know who the 1,040 retirees or the 1,002 workers aged 25 and older are that participated in this survey, but I do seriously question how 80% of the respondents are confident that they can cover their basic expenses in retirement when at the same time they indicated that only 65% of them or their spouse had saved for retirement.  Furthermore, 50% of those that had “saved” had less than $25,000 in savings not including home equity.

So let me understand. Thirty-five percent have nothing saved, while another 32.5% (1/2 of 65%) have less than $25,000. How is it possible that 67.5% of these surveyed individuals can be confident when they have no retirement assets? Not mentioned, but one must assume, that a good percentage of these folks must be participating in a defined benefit pension plan (aren’t they the lucky few).  However, as future generations look to retire on just defined contribution accounts, these results will surely indicate a further deterioration in one’s confidence.

Given that Social Security’s average payout is only about $16,000/year, it is unrealistic to believe that most of these individuals with little in retirement savings would have the financial means to cover basic living expenses if those living expenses include housing, food, insurance, clothing, transportation, etc. Are these individuals continuing to work to support their daily needs? According to EBRI, 34% of those polled are working after “retiring”.  For those currently in the labor force, 79% believe that they will have to work after “retirement”.  Good luck finding an employer willing to keep you on their payroll later in life.


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