Retirement Confidence Falls Sharply Among Older Workers

Market losses and continuing volatility have badly shaken US workers’—particularly older workers’—confidence in the prospects of a comfortable retirement, according to our recent survey of US defined contribution (DC) plan participants.

Only 26% of the respondents to our seventh annual participant survey said they felt “confident” or “very confident” that they’d retire comfortably. Responses varied widely by age (Display). Indeed, the results for younger (ages 18 to 34) and older (ages 50 and older) workers were nearly mirror images. Older Employees Are Worried About Retirement Nearly half of younger workers said they’re “very confident” or “confident” about retirement, but only 14% of older workers felt that way. At the same time, almost half of older workers—but only 21% of younger workers—said they’re “not very confident” or “not confident at all.”

Workers in a middle age group, ages 35 to 49, were also inclined to pessimism, but not quite as much as older workers. Among all three age groups, roughly one-third of respondents chose a middle-of-the-road answer of “somewhat confident.”

The web-based survey was conducted in February 2011 and included 1,000 full-time employees who were 18 or older and worked at a wide range of US organizations that offer DC plans, such as 401(k)s. The survey's many findings are explained in Inside the Minds of Plan Participants. Older workers weren’t always so pessimistic. Prior to the market decline of 2008, similar percentages of each age group indicated that they were “very confident” or “confident” (Display). But confidence for workers age 35 to 49 fell by half in the intervening years—and confidence for those age 50 or older fell by almost two-thirds. Credit Crisis Shattered Confidence of Middle-Aged and Older Employees How and when might confidence be restored?  Certainly a prolonged market recovery would help buoy confidence, but our survey results also suggest the answer might not be that simple.  Among workers confident they they will have a comfortable retirement, the top reasons for their confidence included the presence of personal savings and defined-benefit pension income, followed by Social Security.  Yet there’s an ongoing secular decline in the number of US workers with a defined-benefit pension, particularly in the corporate sector, and future Social Security benefits are less certain than ever.

Simply put, the sources of secure income that have instilled retirement confidence in US workers in the past are unlikely to serve future generations as well. And our survey results, judging by the significant percentage of middle-age and older workers lacking retirement confidence today, suggest that the future is now.

That’s why we believe it’s time for a sustainable approach to putting confidence and security back into retirement savings¾one that incorporates the security of lifetime income within a DC plan. I’ll talk more about this concept in future postings.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

Seth Masters

Chief Investment Officer—Bernstein
Seth Masters is Chief Investment Officer of Bernstein. He heads the team that provides customized wealth-planning advice and manages the firm’s private client portfolios. Masters was previously CIO for Asset Allocation, overseeing the firm’s Dynamic Asset Allocation, Target Date, Target Risk and Indexed services. In June 2008, he was appointed head of AllianceBernstein’s newly formed Defined Contribution business unit, which has since become an industry leader in custom target-date and lifetime income portfolios. Masters became CIO of Blend Strategies in 2002 and launched a range of style-blended services. From 1994 to 2002, he was CIO of Emerging Markets Value Equities. He joined Bernstein in 1991 as a research analyst covering global financial firms. Masters has frequently been cited in print and appeared on television programs dealing with investment strategy. He has published numerous articles, including “The Case for the 20,000 Dow”; “Long-Horizon Investment Planning in Globally Integrated Capital Markets”; “Is There a Better Way to Rebalance?”; and “The Future of Defined Contribution Plans.” Masters worked as a senior associate at Booz, Allen & Hamilton from 1986 to 1990 and taught economics in China from 1983 to 1985. He holds an AB from Princeton University and an MPhil in economics from Oxford University. He is fluent in French and Mandarin Chinese. Location: New York

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