Confidence in our Retirement: Is “The New Normal” More of the Same?

March 15, 2011
300px Consumer confidence average24 Confidence in our Retirement: Is “The New Normal” More of the Same?

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The 2011 Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) was recently released and is beginning to receive a good amount of press coverage.  This is mainly due to the fact that the report indicates that Americans’ confidence in their ability to afford a comfortable retirement has dropped to unprecedented levels in the study’s 21-year history.

As a result of all this low confidence, workers surprisingly don’t seem to be adjusting their savings and spending patterns to prepare for retirement.  Instead, they are changing their expectations regarding what they will need to do during their retirement years – an indication the report calls the “New Normal”.

Some other findings in this year’s study include:

  • An increasing percentage of workers who have less than $100,000 in savings don’t believe they will be able to live comfortably in their retirement.
  • The percentage of workers who either currently save or have saved in the past has essentially remained consistent over the last several years.
  • More than half of all workers report that the total value of their savings is less than $25,000.
  • Less than half of all workers have even calculated how much they need to save for their retirement.
  • The expected retirement age is rising, and more believe that they will need to work during retirement.

The overall message here is useful for our purposes, as discussed later on.  However, some concerns and skepticism about the report are also outlined in the sections below.  The goal here is to help you also keep your eyes open for potential flaws whenever similar reports are released to help you avoid undue confidence or panic.


Most of the 26 sponsors of the report are corporations in the Financial Services industry.  If the logical advice from this study is to either start saving for retirement or to re-adjust our expectations, then wouldn’t sponsoring firms such as American Express, Bank of America/Merrill Lynch, Fidelity, MetLife, Nationwide, Prudential, Schwab, TIAA-CREF, and Vanguard directly benefit?  In other words,  could a potential conflict of interest be perceived, whether real or not?

“Confidence” as a Measure of Data

There is no denying that “consumer confidence” is an influencer of the economy and of personal behavior.  For example, in the U.S., three major indicators of consumer confidence are the Consumer Confidence Index, the University of Michigan Consumer Sentiment Index, and the Washington-ABC News Consumer Comfort Index.  These are closely watched as “lagging indicators” (ones that change after the economy does) as they measure people’s attitudes about the current economy and their outlook of where it is headed over the next 6 months to 1 year.

The EBRI’s analysis instead seems to be based less on observable present and short-term future outlooks, and more on gut reactions and personal feelings regarding the direction of the economy over the long term.  This seems problematic for two reasons.  First, younger workers are part of the survey, and they will not be retiring for decades.  It seems dubious that economic and personal circumstances can be predicted with any level of reliability for that period of time.

Second, as stated above, less than half of all workers even know how much they need to save for their retirement.  If this is true, then how can they intelligently express a reasoned opinion as to whether or not they will be able to achieve a comfortable retirement, whenever it might occur?

Most of Survey’s History was During Expansionary Times

If this is the 21st version of the study, let’s say that the first version was released in March 1991.  Since that date, there have only been two recessions during that period of time – one for 8 months in 2001, and another for 18 months from late 2007 to 2009 (another 8 month recession ended in March 1991).  Assuming confidence is lower during years with recessions (and perhaps recoveries that feel like recessions), there will be very few surveys in the last 21 years that would reflect low confidence.  This year’s “records” would not be all that surprising.

Do we feel worse now than we have in any of the last 21 years?  Perhaps.  Do we feel worse now than we did in the early 1980s, the mid-1970s, or the 1930s?  The report cannot tell us.

Reliance on Future Wealth Transfers?

The report does not seem to take into account that over the next few decades, we will experience the greatest transfer of wealth between generations in our country’s history, as “Baby Boomers” are now beginning to reach retirement age.  Right or wrong, another reason for the current workforce’s lack of retirement investing and saving is that many are anticipating gifts and/or inheritances from financially savvy parents and other aging relatives.

Why the Overall Message Is Still Sound

Do these concerns mean that we should ignore the lessons of the study?  Absolutely not!

Perhaps the urgency of those interested in a financial sector rebound necessitates a potentially overdramatic message to start reinvesting.  However, despite these admittedly ad hominem criticisms, any reminder for all of us to put as much away into IRAs, retirement plans and other savings vehicles, or to at least take time to consider planning for your future is always important and appropriate.

As always, the key question is whether your plans are adequate for your retirement and beyond?

 Confidence in our Retirement: Is “The New Normal” More of the Same?
 Confidence in our Retirement: Is “The New Normal” More of the Same?


Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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