Americans' confidence in their retirement security seems to be soaring with the stock market, but it may be a case of ignorance is bliss, a survey suggests.
Most aren't bothering to figure out how much savings they'll need to live comfortably, and many of today's workers - even those in their 50s - have saved less than $10,000 or even nothing at all.One bright spot: Workers age 25 to 33, worried about Social Security's staying power, are starting to save for retirement at a younger age than their parents and older siblings.
The survey, financed by insurance and mutual fund companies and the American Association for Retired Persons, was released as the Social Security Administration announced the smallest annual cost-of-living increase in a decade.
Sixty-eight percent of workers questioned said they are very confident or somewhat confident of their retirement income prospects, up from 62 percent last year. And the proportion of those "not too" or "not at all" confident dropped from 37 percent to 30 percent.
"It's generally accepted that this is false confidence," said Jeffrey Love, senior research associate for the AARP. "There's a lot of faith here that things will work out, that they'll save later, that the stock market will steadily increase."
Stocks, as measured by the Dow Jones industrial average, rose nearly 50 percent between the two surveys, compared with a more typical annual gain of 12 percent.
Despite the fact that most workers are confident of their retirement prospects and even though a third would like to retire at age 55 or younger, only 36 percent have bothered to calculate how much they'll need. And a quarter of those can't give a figure when asked. That means nearly three-quarters of current workers don't know how much money they should accumulate.
Meanwhile, the proportion of workers saving regularly for retirement was 69 percent, up from 61 percent three years ago. But Mathew Greenwald, president of the Washington-based market research firm that conducted the survey, said saving blindly often isn't enough.
"It's hard to hit a target if you don't have one. It's hard to make decisions about how much to save and how much to spend if you don't know what you're shooting for," he said.
Many aren't saving enough. Ofworkers born before the post-World War II baby boom, those age 53 and older, 11 percent said they had no retirement savings and 9 percent said they had less than $10,000. But 30 percent said they had more than $100,000.
Among the post-baby-boom generation, those age 25 to 33, 25 percent had no retirement savings. On the other hand, 20 percent already had accumulated $50,000 or more.
"They are saving more at this age than their `boomer' older brothers and sisters did," said AARP analyst Sarah Zalpolski.
A look at other answers explains why. Forty-seven percent of workers 53 and older expected their most important retirement income source would be an employer-funded pension or Social Security. Of the pre-baby boomers, only 22 percent said that. Instead, 61 percent said savings would be their most important income source.
The survey also probed preferences for fixing the Social Security trust fund, projected to be exhausted in 2029. If forced to choose, 64 percent of older workers favored increased payroll taxes, compared with 29 percent favoring benefit reductions. Among the youngest workers, 57 percent chose higher payroll taxes compared with 39 percent selecting benefit cuts.
"That's not that much of a generational split," Greenwald said. "To some extent, working children are concerned about retired parents and retired parents are concerned about working children."
The survey of 772 workers and 229 retirees was conducted by telephone in July. Participants were selected randomly to represent a cross-section of the U.S. population. There is a margin of error of plus or minus 4 percentage points for the workers and 6 percentage points for the retirees.