Retirement confidence rebounds, but savings shrink

Americans' faith in their ability to comfortably retire is rebounding from the all-time lows of the past five years, according to the Employee Benefit Research Institute, a non-partisan think tank that conducts an annual retirement confidence survey.

However, the faith is divorced from action and appears to be isolated to the most fortunate -- those who already have some sort of retirement plan.

"Retirement confidence is strongly related to retirement plan participation," said Jack VanDerhei, EBRI research director and co-author of the report. "Workers reporting that they or their spouse have money in [some form of retirement plan] are more than twice as likely those without a plan to be very confident."

Eighteen percent of those surveyed this year said they were very confident about having enough and 37 percent are somewhat confident. That's a slight uptick from last-year's record low reading, which indicated that just 13 percent of Americans were highly confident and 41 percent were somewhat confident.

The bad news? Total savings and investments reported by workers appears to have fallen over the past year, with 60 percent of respondents reporting that they have less than $25,000 saved compared with 57 percent in 2013.

Just 22 percent of working respondents in this year's survey reported that they had saved more than $100,000 compared with 24 percent in 2013. Those who have already retired are faring somewhat better, with a one percentage point uptick in those having saved $100,000 or more.

Not surprisingly, workers with some sort of retirement plan have significantly more socked away in savings and investments than those without. Seventy-three percent of those who have no retirement plan have assets of $1,000 or less, while only 11 percent of those with a retirement plan report equally scant savings.

Ironically, confident or not, only 44 percent of Americans have ever attempted to calculate how much money they're likely to need. This figure indicates that retirement confidence is a wild guess for the vast majority of Americans. How much faith you have in retirement thus may better indicate your level of optimism than your level of readiness. Notably, the seemingly relentless banter about Americans not saving enough appears to have created unmanageable expectations of how much people think they need to save.

When asked how much they thought they needed to save, a whopping 44 percent of respondents thought they'd need to set aside 20 percent of income or more to be comfortable in retirement. Roughly 14 percent thought they needed to save half or more of what they earned to have enough.

Given the relatively small percentage of workers who have attempted to calculate how much they need, it's not surprising that that 22 percent of workers wouldn't even hazard a guess about how much they needed to save. Just 8 percent of respondents thought they'd need to save 10 percent or less of their salary; 15 percent thought they needed to save between 10 percent and 14 percent; and 9 percent of those surveyed thought they should save between 15 percent and 19 percent of wages.

Other studies have indicated that the earlier you start saving, the less you need to save. For young workers in their 20s, a savings rate of 10 percent or less could well be sufficient. However, a 50-year-old who is just starting to save would have to set aside a much larger percentage of income to replace a substantial percentage of his or her working wages.

For those who aim to do more than guess, retirement calculators freckle the web, with investment firms and financial publications offering a variety of choices. Among the best:

• Kiplinger's Retirement Savings Calculator, which allows users to factor in tapping home equity in retirement- a rarity for retirement calculations.
• Transamerica Center for Retirement Studies has a simpler formula, providing a weather report outlook based on how much you've already saved and suggests savings rates to make the outlook sunnier.
• AARP also offers a good, simple calculator.

Kathy Kristof

View all articles by Kathy Kristof on CBS MoneyWatch»
Kathy Kristof, editor of SideHusl.com, is an award-winning financial journalist and the author of Investing 101.

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