Study: Americans Too Confident About Retirement Planning

The majority of American workers think they'll be able to retire comfortably, but most aren't saving nearly enough to meet that goal, according to a new study.

The Employee Benefit Research Institute's annual retirement confidence survey, released Tuesday, found that about 68 percent of workers are confident about having adequate funds for a comfortable retirement, up slightly from 65 percent in 2005.

Click here to visit's Retirement page.

At the same time, more than half of all workers say they've saved less than $25,000 toward retirement, according to the Washington, D.C., based research group. Even among workers 55 and older, more than four in 10 have retirement savings under $25,000.

"`Overconfidence' is the word that comes to mind," said Jack VanDerhei, co-author of the study.

He said that the poor savings performance was especially troubling because it comes as many of the nation's employers are eliminating the defined benefit plans — better known as pensions — that have buoyed the retirements of current workers' parents and grandparents. Many companies also are eliminating retiree health care coverage or asking retirees to contribute more for it.

"It's clear that people currently working should factor into their retirement planning the long-term trend away from traditional defined benefit pensions," VanDerhei said. "That means people need to be saving more than they are."

Not all was doom and gloom in the report, the 16th in a series begun in 1991.

More than 70 percent of workers say that they or their spouses have saved something toward retirement — a percentage that's held fairly level for the past six years, EBRI said.

And while many have meager savings, others are doing quite well at accumulating retirement nest eggs, the study found.

While more than half of workers have less than $25,000 set aside, 12 percent have $25,000 to $49,999; 12 percent have $50,000 to $99,999; 11 percent have $100,000 to $249,999; and 12 percent have $250,000 or more.

As would be expected, older workers generally have more set aside than younger workers, with 12 percent of those 55 and older reporting account balances of $100,000 to $249,999, and 26 percent with accounts of $250,000 and up.

VanDerhei believes that people would save more if they took the time to project what their costs in retirement are likely to be. But just 42 percent of workers say they've done such a calculation.

He suggests that people who are comfortable with managing their own accounts can do well with online calculators, including the Ballpark Estimate calculator that can be found on EBRI's sister site at

"But some people are absolutely clueless about this and frozen into inactivity as a result," he said. "They really should find a fee-based professional to help them out. It's going to cost a couple of hundred dollars, but you'll make that amount up many times in the future."

The study also found that workers are eager for help in saving more.

Nearly 70 percent of workers said they were either strongly favorable or somewhat favorable to 401(k) and other retirement plans setting up automatic enrollment for new workers, and almost the same percentage favored automatic increases in employee contributions.

Dan Houston, senior vice president for retirement and investor services with Principal Financial Group Inc. in Des Moines, Iowa, said that if workers are told they aren't saving enough, most are willing to increase their 401(k) contributions — including automatic increases each year.

He added that workers should aim to save enough to replace 85 percent of their preretirement income when they stop working, not the 70 percent that many workers believe is adequate.

That may sound daunting, but Houston said a 25-year-old man or woman entering the work force today who immediately starts saving 15 percent of income will be able to retire at 60 with enough savings to do that.

"If you adjust your standard of living right after school, and learn to set aside 15 percent — either by salary deferral or company match — it's doable," he said.

A number of large companies have begun introducing automatic enrollment into their plans to try to get higher participation by younger and lower-income workers, but adoption hasn't become widespread.

The survey was conducted by Mathew Greenwald & Associates, a survey research firm based in Washington, D.C. It involved phone interviews with more than 1,250 individuals, with a margin of error of plus or minus 3 percentage points. Principal Financial was among the underwriters of the study.

Click here to visit's Retirement page.