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Are future retirees overly optimistic?

Posted By Barry Ritholtz On April 14, 2006 @ 8:30 am In Economy | Comments Disabled

Yes.

That’s the conclusion of a study [1] by the  Employee Benefit Research Institute [2]. 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 [3] overview:

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

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 . . .

Source:
Workers’ Views On Retirement May Be Too Rosy [3]
KELLY GREENE
WSJ, April 4, 2006; Page D2
http://online.wsj.com/article/SB114411194874516024.html


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 [1]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/04/are-future-retirees-overly-optimistic/

URLs in this post:

[1] study: http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3630

[2] Employee Benefit Research Institute: http://www.ebri.org/

[3] WSJ’s: http://online.wsj.com/article/SB114411194874516024.html

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