A Crisis of Confidence?

John Iekel

There is work to be done in improving overall retirement readiness—and one factor that could help explain that is confidence about retirement planning and plans, recent studies suggest. 

Confidence Wanting

Confidence about finances in general is low among those surveyed in the United States that Unbiased, the U.S. branch of a U.K. firm of the same name that matches individuals with finance professionals, found in their 2023 Financial Confidence Survey that just one-quarter of those they surveyed are extremely confident financially. And 17% go even further and say that they are not financially confident at all. 

That lack of financial confidence translates to low confidence about retirement planning. More than one-third—36%—said they felt least confident about retirement planning; just 21% said they were confident about that. And less than one-quarter—22%— told Unbiased that they would not feel confident about explaining a 401(k) to someone else. 

They are not alone in such findings. YouGov, an international online research data and analytics technology group, has found that 43% of U.S. adults are not confident about their retirement prospects. Gen X “shows a notable level of apprehension about retirement,” says a researcher at YouGov, noting that 48% expressed doubt about their financial future.

Similarly, the Employee Benefits Research Institute (EBRI) earlier this year in its Retirement Confidence Survey found that just 26% of the workers they surveyed were very confident about being able to cover basic expenses when they are retired, and 34% said the were either not very confident or not confident at all that they were doing a good job of saving for retirement. 

Further, while EBRI found that 64% of the workers it surveyed were at least somewhat confident that they would have enough money to be comfortable in their retirement, that was 9 percentage points lower than the 73% who gave that response early in 2022. EBRI said that 64% was the lowest level of confidence they reported in that survey since 2018.

Generation X is the most nervous, YouGov says; they report that almost half—48%—of the members of that generation in their study have doubts about their financial future. Surprisingly, almost as many Baby Boomers—46%—said they are not confident. 

And even among the generation in which they found the greatest confidence, the Silent Generation, just half said they feel secure about their retirement finances. The next “most” confident were the Millennials, 34% of whom said they felt confident about their retirement readiness. 

Readiness

Low retirement readiness reflects—and in turn exacerbates—that low level of confidence. 

YouGov found that 25% of adults haven't even begun to save for retirement. Further, while at least having started is good, they still found that 15% have not even saved $5,000. Their study found that 2% of adults have retirement savings of more than $1 million.

The Silent Generation is in the best shape, YouGov found; still, just 22% of the members of that generation they surveyed have at least $500,000 in retirement savings. 

Younger generations are in even more tenuous shape, YouGov suggests. They report that 44% of those they studied in Generation Z have not started to save for retirement; further, more than 60% of the members of Gen Z and the Millennials have less than $5,000 in retirement savings. “These younger generations are notably behind in terms of retirement savings,” said a researcher at YouGov.

What this Means 

These results, says YouGov, are a “wake-up call” that underscores “an urgent need” to improve financial education and retirement planning. 

“Many states now require financial literacy as part of their high school curriculum, but this does not help those who are already in the workforce,” notes Robert Richter, Retirement Education Counsel at the American Retirement Association. He continues, “Thus, recent laws designed to expand plan coverage won’t have a material impact on retirement readiness and confidence in the absence of effective education and planning services.”   

Action Steps

The research does more than reveal the scale of the problem, says YouGov—it also represents an opportunity for the business community to provide effective education and planning services. 

Allen Houston of YouGov told the NTSA Advisor that a researcher at the organization argues for targeting communications in order to improve retirement plan participation, and confidence in retirement readiness. The researcher suggests that the fact that almost half of the members of Gen X they studied were uncertain about their financial future, they “might be particularly receptive to messages about the importance of increasing retirement savings.” The researcher went on to say that members of Gen Z and the Millennials are “a crucial demographic” for messages about the importance of saving for retirement, and starting early to do so.

EBRI’s findings suggest that increasing retirement plan participation can increase confidence in being ready to finance retirement. They found that 74% of those they surveyed who participated in a plan were confident in that respect, while just 29% of those who did not had that feeling of security. 

About the Data

Wakefield Research conducted a survey for Unbiased of 1,000 U.S. adults ages 18 and above Feb. 17-21, 2023. YouGov derives its results from data it collects continuously, rather than from issuing single questionnaire.