In January, EBRI, a nonprofit research group in Washington, D.C., along with Mathew Greenwald & Associates Inc., a Washington, D.C.-based market research firm, gauged the attitudes and actions regarding the retirement of 1,258 Americans aged 25 and older. Among the findings: 13% of workers said they're "very confident" of a comfortable retirement, which ties the 2009 survey as the lowest in survey history. And 27% said they're "not at all confident" about retirement, up from 22% the prior year and also the highest level recorded by EBRI's annual survey.
Not helping matters is that 34% of workers said they had to tap into an IRA, 401(k), savings or investment accounts--or had to take a loan against those accounts--to pay basic expenses. And there are other stark findings, such as 56% of respondents who said they have less than $25,000 in savings and investments (excluding their primary residence and any pension plans), and 29% who say they have less than $1,000. In addition, 42% of respondents said they calculated their retirement needs by guessing.
Granted, people with more than $100,000 in financial assets registered better confidence numbers. "Unfortunately, even those levels of accumulation will not allow many of them to maintain the lifestyle they want, or in perhaps many cases, even feel is acceptable," Mathew Greenwald said during a press conference announcing the survey results. "But by and large, these higher accumulators have not come to grips with that yet."
In an interview, EBRI research director Jack VanDerhei says he actually took some comfort from the survey's findings. "We've been doing this survey for 21 years, and it's been like watching a glacier move over time in that very little has happened" on people addressing their retirement shortcomings, he says. People who had little or no money saved or pension plans to fall back on have remained confident about their retirement prospects, he adds.
"When I drilled down to look at what groups of individuals had lower confidence levels between 2010 and 2011, the good news is that they were the people who should never have been confident in the first place," VanDerhei says. "The confidence didn't change among people who are empirically on track."
Ideally, people in retirement dire straits will now get it in gear and do something to help improve their lot. "Hopefully, there's a two-step process to correcting this," VanDerhei says. "The first is to realize you've got a problem, the second is to do something about it. They're not yet at step two because they haven't increased their savings."
Given the predicament, it's not surprising the survey found 36% of respondents expect to retire after age 65, a number that has gradually increased from the 11% registered in the initial survey in 1991. In that vein, 74% said they plan to work in retirement, which is far more than the 23% of retirees surveyed who actually worked for pay in retirement.
Portfolios-To-Go May Be Wall Street's Next Thundering Herd
(Bloomberg News) The next thundering herd on Wall Street may be the ranks of low-cost portfolio managers such as MarketRiders and Folio Investing, which cater to self-directed investors. Sites that sell prepackaged portfolios have attracted more than $3 billion in assets over the last three years as more investors leave their full-service brokers. "Individual investors have started to realize they can actually do some things as self-directed investors reasonably well if they're given a platform that allows them to invest more intelligently," said Steven Wallman, chief executive officer of Folio Investing, where investors can purchase predesigned and customized index portfolios for $29 a month.
Some of the firms, such as Flat Fee Portfolios, are too new to have any performance history. MarketRiders can't track the actual performance of its customers' accounts, since it doesn't have custody of their assets. Covestor and Wealthfront Inc., which give users access to third-party investors, publish performance history for the managers they work with on their sites.
"Who are the people that are advising me when I'm going to a faceless Web site?" said Chris Walters, head of wealth management for Pasadena, Calif.-based CitizensTrust. He said investors should be concerned by the lack of performance history available from some of the firms. Traditional brokerages are focusing more on their wealthiest clients in an effort to improve profitability, so the customers leaving these firms tend to be the ones with the smallest accounts, and those investors are potential customers for services such as Flat Fee Portfolios, which began opening accounts in February. Clients with assets of less than $250,000 are offered several predesigned portfolios with an annual review for a fee of $129 a month. At Hedgeable Inc., investors can choose from among 20 different exchange-traded fund or stock model portfolios. Fees for the service, which began opening accounts through its Web site in December, range from 0.75% to 1.5%.