The latest Retirement Confidence Survey conducted by the Employee Benefit Research Institute and Matthew Greenwald & Associates shows employees' confidence in their ability to afford to retire increased last year.
That confidence could be misplaced; less than half have tried to figure out how much they will need in retirement.
This suggests there is a glaring weakness in the education and information employers and the financial services industry are providing many workers that might be leaving them with a false sense of security about their retirement prospects.
The survey shows the percentage of workers very confident of their ability to afford a comfortable retirement increased to 22% in the current survey from 18% in 2014 and 13% in 2013, while 36% are somewhat confident.
The confidence appears to be based for many respondents on at best a wild guess as to what they might need. The survey showed only 48% had tried to calculate how much they are likely to need in retirement.
The likelihood that a respondent, or his or her spouse, had tried to calculate the assets needed for a comfortable retirement increased if he or she had a defined contribution or defined benefit plan or individual retirement account, but only to 60%. That means a substantial number of employees who should be getting the message to attempt to set a retirement savings target are not getting it.
This is despite the fact that many defined contribution plan administrators provide tools that show plan participants how much they are likely to need in retirement, given current salary levels, and what progress they are making toward that goal.
Those who do not have an employer-sponsored retirement plan are in worse shape — only 23% of them have attempted to calculate how large their retirement nest eggs should be.
This is a financial industry failure. The industry must find ways to inspire all workers to figure out what they will need in retirement. One major financial institution includes in its advertising campaign an effort to do so. Others must make similar efforts.
If workers do not know what their retirement target is, they will not be able to figure out how to get there and ultimately suffer in retirement.