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EBRI: ‘Clear dichotomy’ on retirement readiness for those with, without retirement plans

Workers who lack retirement plans not only have less money for retirement, but also have less of an understanding of what they need for retirement compared with workers enrolled in retirement plans, said research published Tuesday by the Employee Benefit Research Institute.

Thirty-three percent of workers without a retirement plan said they didn't know what percentage of their total household income would be needed to be saved each year until they retired so they could retire “comfortably,” according to EBRI's annual retirement confidence survey. Eighteen percent of workers with a retirement plan said they didn't know.

Another 19% of workers without a plan predicted they would need to save 50% or more of household income each year to ensure a comfortable retirement vs. 9% among workers with a retirement plan. The EBRI survey defined a retirement plan as a defined benefit plan, defined contribution plan or individual retirement account.

“There's a clear dichotomy between those who have a plan and those who don't have a plan,” said Craig Copeland, senior research associate at EBRI and co-author of the annual retirement confidence survey report, in an interview. Lower-income workers lacking a retirement plan “have no clue what they need.”

Workers with lower incomes and no retirement plan were more likely to underestimate what they need for retirement, he said.

When asked how much they would need to accumulate so that they could live “comfortably” in retirement, 46% of workers without a plan said less than $250,000 while 23% with a plan cited that number, the survey report said.

By contrast, 49% of workers with a retirement plan said they would need $250,000 to $999,999. Among those without a plan, 29% cited these numbers.

Another illustration of the impact of a retirement plan was a survey question asking how much a worker (and spouse) has in savings and investments, excluding primary residence and defined benefit assets. Among those without a plan, 67% said they had less than $1,000. Among those with a retirement plan, 9% said they had less than $1,000, the survey report said.

For five different dollar categories — starting at $10,000 to $24,999 and ending at $250,000 or more — the percentage of workers with a plan having those amounts ranged from 13% to 18%. The percentage of workers lacking a plan having those amounts ranged from 1% to 4%.