Despite the recent signs of improvement, there is still a dark spot lurking in the background that could have a major impact on the economy—retirement insecurity.

A new survey released by the Employee Benefit Research Institute shows a lack of confidence among Americans in their ability to be able to retire. While the reason behind the insecurity is clear-- lack of savings-- the solution is a bit murkier with many workers just planning to work longer.

I had a chance to speak with Greg Burrows, senior vice president of retirement and investor services at investment firm Principal Financial Group, a long time underwriter of the EBRI’s Retirement Confidence Survey, and asked him to review some of the findings of the survey. 

Boomer: Why do retirement plan participants have a lack of confidence in securing a comfortable retirement?

Burrows: There are a number of findings in the new survey that help explain why confidence remains low. Workers are recognizing the need to save at higher levels for a secure retirement, but immediate financial pressures are overshadowing actual planning and saving. Forty-one percent of workers said the top reason they aren’t contributing or aren’t contributing more to a retirement plan is because of daily expenses and the cost of living.

Workers are also worried about debt and job certainty and have growing doubts about being able to afford basic expenses in retirement. They are even more concerned about having enough money to pay for medical and long term care in retirement. In fact, there was an increase in the number of workers who are not at all confident they will be able to afford medical and long term care in retirement.

At the same time, 57%of workers say they have less than $25,000 in total savings and investments. Some of the lack of confidence comes from not having a clear idea of what they need to save and where they stand now. Less than half-46%-have tried to do a calculation to find out exactly where they stand in terms of what they need to save. Overall workers may actually have a more realistic level of confidence based on what they have saved and all these other contributing factors.

There is a silver lining to the lack of confidence: Nearly 70% of workers say they need to save 10% or more of household income in order to have a financially secure retirement. Four in 10 put the goal at 20% or more. While those may be just guesses, they are at least in the right direction for many workers. Our analysis has found that the average person needs to save about 11%-15% over the course of a career—including employer match—in order to save enough to adequately fund retirement. We think they should shoot for having enough to replace 85% of pre-retirement income. So seeing that so many workers at least recognize that it will take double digit savings is encouraging.

The next step for them is to use one of the easy online planning tools to run an actual calculation to find out for sure where they stand and what their savings goal needs to be. That is important information so can create a realistic plan for both saving and spending which will help them manage the short-term so they can save more effectively for the long term. A financial professional is a great resource to help create a strategy.

Here’s another positive finding from the survey: 83% of workers not currently offered a retirement plan at work said they would contribute if automatically enrolled at a 6% deferral rate. Of those, 58% would continue to contribute at 6% or higher. That is very encouraging to employers who are looking at ways to design retirement plans that will help employees save more effectively.

Boomer: How are health-care costs affecting retirement readiness?

Burrows: They can have a big impact on how much workers are able to save for retirement and how much they will need to spend in retirement. Workers who are healthier spend less on medical needs and have more income to save for retirement.

But even for a moderately healthy retired couple, EBRI finds they will need at least $250,000 just to pay for unreimbursed heath expenses during an average retirement. [1] The retirement confidence survey shows that workers are recognizing how much health care will cost in retirement and that is keeping confidence low--all the more reason to save as much as possible as early as possible.

Boomer:  How has the shift in life expectancy affected retirement preparedness?

Burrows: Many workers will have retirements that last as long as their working careers. That may be giving workers a false sense of confidence about being able to work longer as a way to fund retirement. Thirty-six percent of workers in 2013 expect to work past age 65 vs. only 11% in 1991. The reality is that nearly half—47%- of today’s retirees had to quit work before they planned--often due to health reasons.  People need to save and plan as if they cannot work longer then if they are able to stay in the workforce longer, it’s a bonus.

Another challenge of longevity is finding a way to make your nest egg last as long as you live. This is a big task and a financial advisor can really help a retiree figure out the right combination of investments, annuities or other financial products that will create an income stream that fits each individual’s circumstances.

Boomer: How would you best advise pre-retirees how much they need to save for retirement?

Burrows: Our analysis has found the average worker needs to save 11% – 15% over the course of a career including an employer matching contribution in order to have enough money to live adequately in retirement. Another way to look at it is to have 10 times the final annual income before retirement . So someone making $50,000 would need $500,000 in combination with Social Security to adequately fund retirement.

Boomer: What is the value of a 401(k) tax deferral in acting as an incentive for individuals to enroll?

Burrows: There is a clear link between tax incentives and retirement savings. Nearly half of workers in the EBRI retirement confidence survey say if retirement plan tax incentives were removed, they would stop or reduce their contributions.

The Investment Company Institute also just released a survey which showed that Americans strongly value the current incentives. Eighty percent of households with a retirement plan account said the immediate tax savings on the retirement plan contributions is a strong incentive to save