Minneapolis — April 11
A large percentage of American workers see that the U.S. retirement system is going through major changes, but many are not taking steps that are likely to leave them well-positioned for a comfortable retirement, according to the 17th-annual Retirement Confidence Survey (RCS).
The survey is sponsored by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, with underwriting support from Ameriprise Financial.
The RCS, begun in 1991, is a comprehensive study of the attitudes and behavior of American workers and retirees toward all aspects of saving, retirement planning and long-term financial security.
Highlights from the 2007 RCS include:
- Pension-plan changes by employers have left nearly half of workers less confident about the benefits they will receive from a traditional pension plan, but that those experiencing a decline in retirement benefits often fail to react constructively. Among workers who have personally experienced reductions in the retirement benefits offered by their employer, nearly two in five indicate they have done nothing in response to these reductions.
- Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Forty-one percent of workers indicate they or their spouse have a defined benefit pension plan, while 62 percent say they are expecting to receive income from such a plan in retirement. Both numbers suggest unrealistic beliefs.
- Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000. The majority of workers who have not put money aside for retirement have little in savings at all — seven in 10 of these workers say their assets total less than $10,000.
“The level of pension plan change employees have experienced over the past several years has been unprecedented, but change has not been isolated to retirement plan benefits,” said Rusty Field, Ameriprise Financial vice president and general manager of workplace financial planning. “Virtually all areas of employee benefits have been affected by increasing costs and more complicated choices — and employees have been struggling to keep up with it all. Without a clear plan, supported by a collaborative relationship with a trusted adviser, it is not surprising to see these results.”
Additional key survey findings:
- Americans generally are quite confident they will have enough money to live comfortably throughout their retirement years. This year, 72 percent were either very confident (30 percent) or somewhat confident (42 percent) of having enough money for a comfortable retirement. That is statistically the same as the 70 percent who were either very confident or somewhat confident in 2006.
- Changes in the employer pension system that have taken place in the last five years, however, have left 45 percent of workers either a little less confident (27 percent) or much less confident (18 percent) about the amount of money they will receive from a traditional pension from an employer. Sixteen percent said they were much more confident (5 percent) or a little more confident (10 percent) about receiving money from an employer-provided traditional pension. The rest were just as confident as workers were five years ago.
- The survey showed that nearly one in five workers or their spouses (17 percent) experienced a cut in the level of retirement benefits from an employer plan in the last two years. Seventy-one percent of workers and their spouses experienced no decrease in the last two years. The finding comes against a background of many employers switching from traditional defined benefit pensions to defined contribution plans (typically 401(k) plans) in recent years.
- The survey found that more people (40 percent) found the advice of a financial professional most helpful when compared with all other sources of education materials about retirement. The next-highest-rated sources people found most helpful were the advice of family, friends or co-workers (18 percent) and written materials from an employer (15 percent). Online professional investment advice services were only found most helpful by 1 percent of workers surveyed.
“More people are recognizing the value of having a relationship with financial adviser to help guide them in making benefits decisions that fit within an overall plan to achieve their retirement dreams,” Field said.