There’s no question workers continue to clamor for workplace educational and financial wellbeing programs. But, it turns out, they aren’t as interested in learning about how to better manage their day-to-day finances or reduce their student loan debt as they are keen to know how best to manage their healthcare and long-term care expenses in retirement.
According to the Employee Benefit Research Institute’s latest Retirement Confidence Survey, 68% of workers said they wanted comprehensive financial planning to help them plan for healthcare costs in retirement and figure out how much they need to save for their post-work years.
The numbers dropped when it came to those interested in debt counseling (48%), day-to-day budgeting (47%) and student loan debt assistance (39%), says Lisa Greenwald, executive vice president of Greenwald & Associates and co-author of the report with EBRI’s senior research associate Craig Copeland.
“There is a theme to this,” she says. “Retirement-related topics are viewed as more helpful than some more day-to-day. I think a lot of financial wellness programs are focused on the day-to-day. That might be a disconnect.”
EBRI’s report comes on the heels of Fidelity Investments’ annual retirement cost estimate, which found that a 65-year-old couple retiring this year would need $280,000 to cover healthcare and medical expenses throughout their retirement. That’s a 2% increase from 2017, and a whopping 75% increase from Fidelity’s first estimate in 2002.
Managing healthcare costs in retirement was one of the major concerns identified by both employee and retiree respondents in EBRI’s survey.
“Retirees are less confident in being able to afford medical expenses and the share very confident in affording long-term care also declined,” Greenwald says.
Meanwhile, 80% of defined contribution plan participants say they would be very or somewhat interested in an investment option that guarantees income for life when they retire, according to the EBRI report.
“That’s a pretty big number, especially in comparison to the uptake rates and employer buy-in for income options in the plan,” she says. “I think the demand is there and workers are looking to solve the income piece, the guaranteed income piece of retirement, particularly because they have low confidence in Social Security and defined benefit plans are going away.”
Overall, the survey found that the majority of workers in every income category, except for those who make under $25,000, were very confident or somewhat confident that they would have enough money to retire comfortably. Confidence levels go up based on income levels.
For those under $25,000 a year, only 35% said they were confident they would have a secure retirement.
Greenwald suggests that some of this confidence may be misplaced, especially when actual preparation is taken into consideration. The key for workers is to go through the motions to try and figure out how much they will need for everyday living expenses and healthcare in retirement. Just that act of trying to figure it out makes people feel a bit more confident, she says.
There are calculators out there that can tell people, roughly, how much they will need to save by the time they retire, and there are also calculators and tools out there for trying to estimate the retirement healthcare need specifically.
“What I found interesting is we don’t know from the data whether or not the people who tried to estimate their healthcare expenses were right or not,” Greenwald says. “We know that the very attempt made them more confident about retirement overall; it made them more likely to say their healthcare expenses were as expected. So we know that, regardless of whether they were accurate, there was a benefit to the attempted calculation.”
The survey found that there are a lot of unrealistic expectations surrounding retirement.
“We see big disconnects between when retirees actually retired and when workers think they are going to retire. There are a majority of workers who think they are going to work for pay in retirement but, based on retirees’ experiences, relatively few actually will,” she adds.
The key point is that people who used retirement or healthcare expense calculators had more realistic expectations for their retirement.
Most retirement calculators don’t take into account long-term care expenses, she added, so that’s another thing to take into consideration when planning for retirement.
The survey found that only one-third of retirees were very confident in their ability to live comfortably throughout retirement. This was similar to last year’s numbers, but this year’s retirees’ confidence that Social Security and Medicare will be there for them in retirement has greatly eroded since last year.
In the 2018 survey, 46% of respondents said they were very or somewhat confident in Medicare vs. 52% in 2017, while 45% of current respondents were confident in Social Security vs. 51% in 2017. Only 7% of retirees said they were confident that both programs would be around and providing the same level of benefits throughout their retirement.
The report was based on 2,042 individual responses in an online survey. Respondents had to be age 25 or older to participate. Of those, 1,002 were working adults and 1,040 were retirees.
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