Let's Stimulate a Recovery in Confidence

More dollars, without more hope, won't bring the recession to an earlier close.

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The deep and lengthy recession has made what could be a lifelong impact on older Americans' views about retirement and their future well-being, according to a new survey by The Hartford Financial Services Group. "Today, on the heels of a deep recession and volatile equity markets, America's confidence is on the wane, replaced for many by worry and anxiety," the company said in releasing the findings. "Those concerns are especially prevalent for those who have not taken the time or made the effort to plan for retirement and who now doubt their financial wherewithal to retire."

[See Best Affordable Places to Retire.] The Hartford has been doing this survey for four years. People continue to doubt they have enough money for retirement, but the numbers get worse each year. More importantly, confidence in the integrity of retirement plans and pensions has plummeted.

Fewer than 30 percent of those surveyed (750 people age 45 and older were polled in September) were either extremely or very confident that they can count on income from their company retirement plan for the rest of their lives. That's down from more than 52 percent during a very tough 2008. More importantly, more than 34 percent said they were not at all confident about their private pensions in the 2009 survey. Only 2.6 percent felt that way last year—an enormous swing. Confidence in Social Security was more stable. But while people know they will need to rely a lot on Social Security, few think it will pay them enough to maintain their standard of living as they age.

In the 2007 survey, fewer than 25 percent of those polled ranked keeping up with daily expenses for basic necessities as their top financial priority in retirement. More than 43 percent that year said enjoying life was their top priority. This year, 65 percent put the basics at the top of their list. Enjoying life was listed by only 14 percent—the same as affordable healthcare. Nearly 60 percent of the people surveyed said they have reduced their standard of living or cut spending in the past year.

The Hartford sells a lot of insurance and retirement investments, so it's not surprising that the company looked separately at people with retirement plans and found their outlooks and confidence on more solid ground than the general public. Aesop nailed it with the fable about the thrifty ant and carefree cricket, but this message hits home a lot harder when times are as tough as they are today.

[See Best Places to Retire.]

And our loss of confidence, it seems, has just not responded to signs that conditions are slowly getting better. Economic stimulus efforts have produced modest results at best. Huge Wall Street bonuses, apparently permitted if not encouraged by government policies, put the lie to so much rhetoric about us all being in the same boat. The rancor in Congress shows little sign of abating.

And what if it's not companies, credit markets, and shovel-ready projects that need a jump start? What if it's us? The American psyche has taken such a body blow during the past two years. Confidence has suffered and our collective optimism is hard to find on many days. Can you throw money at that problem or will it take something else to get us believing in a brighter future?

[See 6 Steps to a Better Retirement.]