Are future retirees overly optimistic?


That’s the conclusion of a study by the  Employee Benefit Research Institute. EBRI determined that more than half of workers saving for retirement have less than $50,000 put away; Other employees are counting on employer-provided benefits in retirement that are increasingly unavailable.

Here’s the WSJ’s overview:

"Despite recent moves by large companies to freeze pensions and
chip away at retiree-health benefits, Americans remain confident — if
dangerously naïve — about their retirement prospects, according to new

Many workers are counting on traditional pension plans to pay
their bills in retirement, even though such plans are fast disappearing. Only
40% of working couples currently are covered by pension plans, but nearly
two-thirds of surveyed workers — 61% — expect to get income from such a plan
in retirement, according to the Retirement Confidence Survey, scheduled for
release today by the Employee Benefit Research Institute, a Washington
nonprofit, and others.

The responses in the survey, conducted annually for the past 16
years, reflect few worries about the spreading curtailment of pension plans.
Twenty-four percent of the survey’s participants said that they are very
confident that they will have enough money to live comfortably in retirement —
virtually the same number as last year — and 44% of those surveyed said they
are somewhat confident about their financial prospects in later life, an
increase of four percentage points from last year."

See table below for more details . . .

Workers’ Views On Retirement May Be Too Rosy
WSJ, April 4, 2006; Page D2

Rosy Retirement Glasses?

Workers continue to express the same confidence about
their financial prospects in retirement despite a continuing lack of
preparation and recent cutbacks in benefits.

Year Very confident Not at all confident
1996 19% 16%
1997 24 15
1998 22 13
1999 22 9
2000 25 10
2001 22 17
2002 23 10
2003 21 16
2004 24 13
2005 25 17
2006 24 14

Retirees are considerably more likely than workers to
feel very confident that they will have enough money to comfortably get
through their retirement years, perhaps because they already are living
in retirement.

Year Very confident Not at all confident
1996 26% 8%
1997 33 11
1998 19 24
1999 31 8
2000 34 11
2001 37 11
2002 40 11
2003 39 11
2004 42 13
2005 40 7
2006 40 13

Source: Employee Benefit Research Institute

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What's been said:

Discussions found on the web:
  1. me commented on Apr 14

    “Only 40% of working couples currently are covered by pension plans, but nearly two-thirds of surveyed workers — 61% — expect to get income from such a plan in retirement,”

    How can 1/3 of them be covered by a pension plan and yet 2/3 expect pension income? Do they expect to get a new job that all of a sudden comes with defined benefit and healthcare benefits?

    How can they be so stupid? American capitalism is in a race to the bottom.

  2. Apex commented on Apr 14

    I wondered if the survey properly controlled for people who are not currently covered by a pension but have a vested pension from a previous job. I don’t know how common that is, but I fall into that category. My vested pension has been annuitized and farmed out to Fidelity so as long as they don’t go bankrupt I should get it. Now its only a little over 5 years of pensionable earnings so it is only scheduled to pay out $473 per month when I am 65 in 2035. So its not like I am counting on that to be any significant portion of the money I will need, but the fact still remains that I will get a pension and if asked the question on a survey would have to respond in the affirmative.

  3. B commented on Apr 14

    I’m not sure what such a study, if accurate, accomplishes other than a hidden agenda. Regardless, it’s another reason to fix Social Security. And do it in such a way to protect those who really need it. We do not want our parents, grandparents, aunts, uncles and friends living on the street.

    I can’t say I believe any statistics quoted in this article though. Surveys can be so manipulative. I can assure anyone that I can get the answer I WANT based on how the questions are asked, what the leading questions are, what context they were asked, etc. We’ve become a nation of worthless surveys.

    It makes most people appear stupid beyond belief. Likely a journalist and polling organization with some type of bias to grind.

  4. drey commented on Apr 14

    Most people ARE stupid beyond belief – lets not forget that in the run up to the Iraq war, half believed that Saddam Hussein was directly linked to 9/11.

    Maybe ‘stupid’ is a bit harsh but most people will choose a rosy scenario when faced with different potentialities, or a reality which conforms to existing beliefs regardless of the facts, especially if the facts are unpleasant.

  5. Software Nerd commented on Apr 14

    “Stupid” is too broad to be useful; however, I do think many people are less concerned about the long term than they ought to be.

  6. critical thought commented on Apr 14

    “We do not want our parents, grandparents, aunts, uncles and friends living on the street.”

    Agreed. We don’t want people on the street. . .

    But. ..

    I’ve always been a good saver, I have always contributed to my 401k. Why should I have to pay additional taxes because my idiot uncle, grandparent, friend wants to buy a jet ski instead of save for retirement?

    We need to find some way that doesn’t punish the people that save. . . an extra tax on the first 5% of income that isn’t saved or something. ..

  7. B commented on Apr 14

    “Why should I have to pay additional……….” & “Most people are STUPID beyond……………..”

    I can see we are all compassionate about our fellow man. Altruism, the one trait that separates us from truly being animals, is alive and well. Do either of you ever volunteer for those less fortunate for you? Ever work in a soup kitchen line? Ever give a homeless person $20?

    Of course not! I made it on my own, they can do the same. Is that it? For someone who believes most people are stupid, that likely means, your children, your parents, your spouse and your friends, or a majority of them, fit into that category. Maybe you even believe this to be so. Maybe your parents were quite stupid to have you. Possibility?

    And as far as others not saving, so why should you help? I guess you aren’t a spiritual person? So, you don’t believe in the unconditional help and acceptance of those less fortunate than you regardless of race or creed? Your heart didn’t sink when you saw what happened with Katrina? Or see people living in a cardboard shack in Central America? Or people being massacred in Darfur just because?

    Why should you help? Maybe because life threw them a curve ball. Maybe their parents died at a young age and the emotional trauma was something they dealt with their whole life. Maybe they are mentally ill. Maybe they were raped. Maybe they lost their pension. Maybe they were devastated by a medical crisis. Maybe they just aren’t as smart as you and they could never, try as they may, get a job which allowed them to get ahead. Is being born less intelligent than you a sin payable through our lack of compassion? Why should you pay to help those less fortunate than you? It’s simple. Because you are a human being and because you can help to bring dignity to someone less fortunate than you through your generosity.

    On that note, we can all celebrate Passover or Easter and what it represents for all who have faith there is something in all of us that is kind and good.

  8. D. commented on Apr 14

    Definition of stupid according to

    ” 2. Tending to make poor decisions or careless mistakes”

    So stupid is being properly used.

    As for being compassionate… I’ve given up helping people financially a priory unless they want to be helped. And up to now, in my experience, most don’t want help. I know I’ll be picking up broken pieces but please let me express my anger and resentment now before I need to play nurse.

    There are many places where you can find American household’s net worth and the median boomer has around around 150K-200K of net worth if my memory serves me right. That includes home equity, so 50K in investments does not seem far off.

    According to the latest StatCan figures, median net worth of Canadian households:

    55-64: 272K with 20% over 500K
    65+ = 211K = 185K US with 13% over 500K

    Most of this is probably home equity and a 500K investment portfolio is about what is needed to gross 45K at retirement! It doesn’t take a rocket scientist to see that there won’t be enough money.

    I am always amazed by the number of investment professionals who have not done their homework. They should be looking at the demographics tables and statistics. Especially in today’s worls where two people could own a million dollar house and a Porsche but one has a retirement fund and the other has no money saved up.

    It used to be that you knew how much a person was worth by what they purchased. It’s not the case anymore. This consumer debt-laden consumer society has really created problems. We’ve never had so many educated people yet they can’t budget because home economics is not mandatory anymore!

    It doesn’t help that our system is based on trust and confidence so our leaders are forced to lie.

    And to top it off, it’s much harder for realists and pessimists to make it up the coprorate ladder. Therefore, we’re being run by optimists!

  9. B commented on Apr 14

    Luke 10:33-36 But a Samaritan, as he traveled, came where the man was; and when he saw him, he took pity on him. He went to him and bandaged his wounds, pouring on oil and wine. Then he put the man on his own donkey, took him to an inn and took care of him. The next day he took out two silver coins and gave them to the innkeeper. “Look after him,” he said, “and when I return, I will reimburse you for any extra expense you may have.”

    Funny? I don’t see any ifs ands or buts in there.

  10. D. commented on Apr 14

    Sorry to disappoint you but not everybody follows the bible.

  11. fred hooper commented on Apr 14

    The following comments from yesterdays “boomer” thread are indicative of “victim hood”, and lack of any reason or foundation.

    Pete says, “In short, my generation (Gen-X) has been roundly screwed by the boomers who currently run politics/big business. At some point, that will change and we’ll be screwing you back, count on it.” Oh, who screwed you? Some right-winger, a religious zealot, Bush, your boss? Screwing us back? Start with your boomer-momma? This is typical left-wing drivel.

    Anybody says: “And having to pay for your parents to live b/c they spent every dime they had, in addition to all of their inheritance will change the attitude of Generation X”. Was a daddy a bum? He obviously didn’t teach you how to spell. How does an entire generation become reliant on their kids anyway?

    D. says “The writing is on the wall. It’s going to be expensive especially when they think they have a right to all new therapies.” Do you really think boomers are the only one’s that think that way? Do you really think all boomers think that way?

    Would you embiciles (look that one up D.) care to explain why record numbers of 20 and 30 something gen-Xers are still living at home?: “Nearly 19 million adults between the ages of 18 and 34 still live at home, the US Census reports – a 48 percent increase since 1970.” (warning to Pete and D., this link goes to Christian Science Monitor):

    Please cut the gross generalizations and maybe provide some facts to back-up your blather..

  12. genxr commented on Apr 14

    If you’re going to play the pedant, you should spell your insults correctly, imbecile.

    If you want to take me as a case study, I’m 23, have more net worth than my parents, and have lived on my own since I was 17. I’m very grateful for everything they’ve done, but I do wonder how such a huge household income has resulted in relatively little savings.

    Though my fellow young guy was a bit harsh in his comments, I think it’s more than fair to say that our generation is more inclined to save than the Boomers. Imprinting causes generations to flip in a lot of ways. Just ask the parents of the Boomers, who went through the Great Depression.

    Trouble is, the income down here isn’t magnificent for most of us.

  13. fred hooper commented on Apr 15

    Ouch! Excuse: Beer. Yes, me imbecile… Note to self, use Preview.

    My parents went through the depression and I’m big on saving. My gross generalization is: why are so many GenXers driving cars that are worth 5-10 times more than mine? (I make 6 figures and drive POS 96 chevy). My point is: stop categorizing and blaming others. Why is Genx more inclined to save? Any facts or references other than saying it’s “fair to say”? Could income disparities be due to global labor arbitrage, and not due to some boomer conspiracy?

  14. DonRobbie commented on Apr 15

    I wonder if some of the folks who answered that they were expecting a pension income might be talking about a 401K or some other defined contribution plan? It looks like the 40% number comes from a different source. Might be a case of WSJ and the EBRI defining terms differently.

    Also many folks may plan on contributing to a 401K plan later (perhaps when they get a “real” job) and thus expect that to be a source of income when they retire even though they do not have or contribute to such a plan now.

  15. D. commented on Apr 15

    Personally, I can find something wrong with every generation but this post was about the coming retiring generation which just so happens to include the Boomers!

    I’m a Gen-X. Do I happen to think we’re better? Not a chance. I guess I could have posted something negative about us but it would have been kind of out of place. I blame Boomers for these excesses but is it their fault. No. In my mind, Boomers are a product of their time, just like my generation is. It’s just plain old human nature and group dynamics at work.

    Now onto generalizations… It’s dangerous to generalize but if you don’t, it can be even worse. Proof is in the pudding: by focusing on the individual (refusing to generalize) instead of the community (generalization) we’ve created an entitled people!

    Are all Boomers “bad”? No, but there is a tipping point where enough people with a specific attitude will shape the social fabric of a group When looking at the big picture, I think it is safe to say that Boomers as a group represents excess, lack of savings and entitlement. I also think most of us are enlightened enough to know that not all Boomers are ‘bad’ and that many Gen-X also suffer from the same ailments!

    In the final analysis, conservative Boomers who’ve only been buying Camrys and Gen-X will be paying for those who’ve been living beyond their means.

  16. genxr commented on Apr 15


    “Members of Generation X and Y and the Swing cohort were more likely to report that they spend less than their total income.”

    “Household income was highest for the Older Boomers and lowest for the Generation X and Y cohort.”

    “Older Boomers also were the most likely cohort to report that they are savers.”

    A lot of it has to do with lifecycle savings, and I’d find it fairly remarkable that these younger generations are socking away as much as they are. I’d call it something of a wash, all in all, but this is far and away the most important sentence of the report:

    “The median amount held in retirement accounts–$2,000–provides another indication of the wide variation in the amounts held by households.”


  17. Idaho_Spud commented on Apr 15

    Anecdotally from a later boomer… I’ve noticed that the younger group, age 28-40 where I work (admittedly a very small sample) is way more willing to plunge headlong into debt than those of us who have been through a few recessions during our working careers.

    One 30-ish guy re-financed his house three times last year!!! He and his wife have the nicest vehicles and surgeries that money can buy. Can’t help but think that spending four times his salary in one year is going to hurt in the long run…

  18. calmo commented on Apr 15

    Kudos to B for the timely compassionate view and hope not just the Boomers can afford this view.
    Actually I hope it is not just a timely view either.
    I also hope that people of other faiths are not being excused from being compassionate on this weekend either.
    But about us atheists:
    why should we help spend-thrift Donald while we work our fingers to the bone? Why should this grasshopper sing and dance his way to oblivion while we work our butts off?
    The only faith he has is that we will let him in when it starts freezing outside. Given diminishing resources and our high regard for prudencial allocations of these resources, what value is there in rescuing these soon-to-be popsicles?
    We are sending the wrong message to the grasshoppers. I just know it.

  19. btm1 commented on Apr 29

    “How can 1/3 of them be covered by a pension plan and yet 2/3 expect pension income? Do they expect to get a new job that all of a sudden comes with defined benefit and healthcare benefits?”

    No, I suspect that they are planning to stay with one company long enough to become “vested.” That can be a good plan, but it still requires hope that the company manages its finances and has an actuarily sound pension fund — one that doesn’t rely upon earnings of future workers to pay the benefits of retirees.

    One of the benefits of the 401k approach to retirement is that you can take it with you when you change jobs. I have a pension from a company I was with for 19 years, but the pension is based on a percentage of my top earnings, which were about $25,000 per year. Those were good earnings for the time (early 1970s, before the double digit inflation of the Reagan years), probably equivalent to over $100,00 per year, but today would be near poverty wages. So what I get for my 19 years by next year may be just enough for one tank of gas for my car per month. I also rolled over a 401k worth about $25,000 at the time. I invested it all in a Merrill Lynch account. Obviously, I made poor investment decsions, because today that account is valued at $27,000! With better luck (or tips) it could have become 100 times that amount!

    That brings up a societal question: should decent retirements go only to persons who are above average money managers and have made and saved enough on their own that for them pensions and 401ks are just gravy on top of an already full plate? Social Security was originally intended to provide for those who were less capable money makers/money managers.

    If the labor costs in other countries remain too low for the US employee to compete, and computers and automation continue to increase productivity of US employees, at some time in the future a small percentage of the population will be able to do all the work that currently gives us a low unemployment rate. That is, high productivity will provide a cornucopia of food and other goods, enough for the entire population, but consumers will not have money to purchase those products. Our University scholars should start thinking about how to provide the bulk of our population with means of acquiring food, shelter, medical care and other necessities of life at such time in the future that they can be produced with minimal human labor. It’s never too early to develop and discuss contingency plans.

  20. btm1 commented on Apr 29

    >>Posted by: B | Apr 14, 2006 11:44:30 AM

    >Maybe ‘stupid’ is a bit harsh but most people will
    >choose a rosy scenario when faced with different
    >potentialities, or a reality which conforms to existing
    >beliefs regardless of the facts, especially if the facts
    >are unpleasant.

    >>Posted by: drey | Apr 14, 2006 12:40:32 PM

    >”Stupid” is too broad to be useful; however, I do think
    >many people are less concerned about the long term
    >than they ought to be.

    Possibly a reason many people don’t think about their futures too much is that they feel powerless to do much about it. Putting money into the savings bank or into government savings bonds doesn’t “grow” the money fast enough to make up for small amounts they can afford to put into savings. Sure, they have some discretionary income that they spend wastefully, but man cannot live by bread alone. Even if they do save, they can only hope that the economy will still be a viable one when they reach retirement. In the twentieth century there was more than one country whose money became as worthless as Confederate dollars. During double digit inflation, one is perhaps better advised to spend as quickly as able, because the costs of goods and services increase much faster than one’s income.

    Much of the saved wealth is in the form of home ownership. Such wealth can be somewhat illusory. You always need some place to live. When you sell you may need to put it all back into your new home, even if you downsize. My experience is that to make real money in real estate requires (or, certainly, helps) having investment property in addition to your residence.

    I am older than most of you. My generation came before the Boomers. No, not the Greatest Generation, the one in the middle that is usually forgotten about. We are called the Silent Generation.

    Regarding stupidity. I have been privileged in my life to have known personnally people from a variety of circumstances. One was a lawyer working in the White House. Another was a diplomate at the World Bank. One of my immediate supervisors eventually became the CEO and Chairman of Lockheed Martin. I also had in my circle of acquaintences a truck driver, a DC police officer, and at least one school teacher. I worked with some Special Forces sergeants, and I knew a couple of young men who worked as unskilled laborers. They comprise a vast difference in level of education, and possibly also in intelligence test scores.

    I learned that it can be a big mistake to equate level of education with intelligence. Those Special Force sergeants were as smart as anyone. I think that they were just not comfortable seated in a classroom all day. But I’ve also discovered that the amount of difference between an above average intellect and a below average one is not significant outside the classroom. Further, people can be smart about some things and in the dark about others. I think everyone I’ve known had some knowledge or a way of thinking different from mine, and usually worth listening to. So I think it is sad to think people are stupid because they voted differently than they should have, or placed their faith ahead of their logic. They may be stupid in some ways, but I’ll bet they are smarter than you in some way or another.

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