Cecily O'Connor
RedwoodAge.com

The nation's weakening economy is casting a dark shadow over retirement plans for tens of millions of American workers.

The percentage of workers "very confident" about having enough money for a comfortable retirement has tumbled to 18 percent from 27 percent last year, according to the Employee Benefit Research Institute's annual retirement confidence study. The 9 percentage-point decline marks the biggest one-year drop in the 18-year history of the survey. 

"The economy and health costs are major concerns," said EBRI president Dallas Salisbury. 

Americans are feeling anxious about how and when the economy will bounce back from recession. Worries about upcoming first-quarter earnings reports have been stoking more jitters as the economy continues to buckle under the pressure of the housing, credit and financial problems. 

Withering confidence occurred across all age groups and income levels, but was particularly felt by younger workers and those with lower income. Confidence among retirees over 55 also was lower, with many saying they are focusing on other issues besides retirement. About 29 percent of retirees reported confidence in having a financially secure retirement, which is down from 41 percent a year ago. 

When asked about the most pressing financial issue facing most Americans today, 5 percent of workers and 4 percent of retirees cited saving or planning for retirement. Instead, making ends meet was higher on the list of issues. Paying for health insurance or medical expenses, making mortgage payments, paying down debt, energy costs and job uncertainty also were seen as more pressing than retirement planning.

Spending More on Health
Health costs, in particular, have become a big concern. Among retirees who left the work force earlier than planned - a trend being shaped by many older boomers - more than half  said they did so because of health problems or disability. To that end, about 44 percent said they have spent more than expected on health care expenses. 

Lack of confidence about health insurance is at the core of money jitters for workers of all ages. About 42 percent of all workers now expect to have access to employment-based health insurance in retirement, which is down 8 percentage points last year. In measuring health another way, workers said they are increasingly worried about having enough money for medical expenses and for long-term care expenses.

While 41 percent of retirees said they currently have access to health insurance through a former employer, some boomers nearing retirement may not be as fortunate because some employers are eliminating health care coverage for future retirees.

Silver Lining?
The "very dramatic reduction" in retirement confidence may provide a silver lining, however, Salisbury said. Americans "finally may be waking up to the realities of being able to afford retirement.”

At least half of workers said they and/or their spouse have tried to calculate how much money they will need for a comfortable retirement, which is up from the low point of 29 percent logged in 1996.

A retirement savings calculation tends to be a catalyst for establishing better savings habits: 44 percent who calculated a goal changed their retirement planning, and of those, almost two-thirds started saving or investing more. Overall, workers aged 55 or older were more likely than younger professionals to try a calculation.

Still, they tend to be pretty conservative in their savings goals. About 31 percent of workers over 55 expect they'll need at least $250,000 saved for retirement; 18 percent believe $251,000 to $499,000 will suffice; 15 percent see $500,000 to $999,999 as a sufficient amount, and 12 percent think they'll need a million or more.

Also concerning is that retirees are less likely to believe they can always cut back on their lifestyle if it looks like they might use up all of their savings. Many now think they will live long enough to use up all of their savings.

The study, conducted with the Mathew Greenwald & Associates research firm, was based on telephone interviews with 1,320 individuals over 25.