Jan. June 2001 Feb. Welcome to the Employee Benefit Research Institute Online EBRI Issue Brief (ISSN 0887-137X) is published monthly at $300 per year or is included as part of a membership subscription by the Employee Benefit Research Institute, 2121 K Street, NW, Suite 600, Washington, DC 20037-1896. Periodicals postage EBRI Mar. Table 7 Table 16 Table 14 Table 9 EBRI Chart 5 Table 8 Chart 6 Table 23 Table 17 Table 3 rate paid in Washington, DC. POSTMASTER: Send address changes to: Table 15 ChTable 10 Table 20 art 3 Table 19 EBRI Issue Brief, 2121 K Street, NW, Suite 600, Ch Table 4 art 1 Table 13 Table 11 Table 1 Table 12 EBRI 2001 Retirement Surveys: Educational Materials and Opportunities Provided by Employer and Their Effectiveness, Retirement Confidence Among Asian-Americans Percentage of Preretirement Income EMPLOYEE Familiarity of Retirement Pl Type of Defined Contribution Plan Offered, by Size of Business an Op Percent tions Among Small Emplo age of Workers Saving for Retirement yers Without Retirement Plans Expected and Actual Retirement Age: 2001 Washington, DC 20037-1896. Copyright 2001 by Employee Benefit Research Institute. All rights reserved, No. 234. Reasons Why Workers Are Confident About Social Security and Medicare Table of Worker Confidence Length of Time Offering Some Type of Retirement Plan, by Age of Business That Medicare W Motivators for Plan Sponsorship ill Continue to Provide Benefits of Equal Value Confidence in Financial Aspects of Retirement by Calculation of Retirement Savings Needs: 2001 Worker Confidence in Ha Business Characteristics of Sponsors and Nonsponsors, by Size of Business Reasons for Not Offering a Retirement Plan, by Size of Business Vehicles Used by Asian-Americans to Save for Retirement Retirement Confidence Among African-Americans ving Enough Money to Live Comfort Worker Confidence in Financial Aspects of ably Throughout Retirement Vehicles Used by Hispanic-Americans to Save for Retirement Vehicles Used by African-Americans to Save for Retirement ------- Retirement Confidence Among Hispanic-Americans ----- Apr. Among Those Reporting Their Employer Provides Educational Materials or Opportunities Needed and Available in Retirement (among employers offering a defined contribution plan) ------- BENEFIT Planning Planning Planning Planning Planning for for for for for retirement retirement retirement retirement retirement is is is is is not not not not not (among savers) a a a a a one-size-fits-all one-size-fits-all one-size-fits-all one-size-fits-all one-size-fits-all ----- exercise. exercise. exercise. exercise. exercise. The The The The The Retirement purpose purpose purpose purpose purpose of of of of of Ballpark Ballpark Ballpark Ballpark Ballpark (among savers) EMPLOYEE (among savers) Very Somewhat 75% Not Too Not at All ------- 80% Back Forward Home Reload Images Open Print Find Stop Expected Actual ----- Very Somewhat 71% Not Too Not at All Age of Business Much More Somewhat No More 100% Total 5–20 Employees 21–100 Employees Most Frequently Mentioned Reasons Most Important Reason Social Security Medicare Major Reason 3% Very 68% Somewhat 6% Not Too Not at All 100% 2% 4% Very 7%Somewhat Not Too Not at All Retirement Confidence Sur RESEARCH 3% 3% 66% vey (RCS), Minority RCS, Confident Confident Confident Confident 65% is is is is is simply simply simply simply simply to to to to to give give give give give you you you you you a a a a a basic basic basic basic basic 3%idea idea idea idea idea of of of of of the the the the the savings savings savings savings savings you’ll you’ll you’ll you’ll you’ll need need need need need when when when when when you you you you you retire. retire. retire. retire. retire. Expected Need 7% Actual Experience (percentage of workers) (percentage of retirees) The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is Effectiveness (among those provided with each item) Confident Size of Business Confident Confident Confident Contents Likely More Likely Likely 61% 60% May A work-related retirement savings plan, such as a 401(k), 403(b), or 457 plan 59% 75% Confident Confident Very Confident Somewhat Not Too Confident Not at All Regular savings or investments set aside for retirement Confident Confident Confident 70% Confident BENEFIT A work-related retirement savings plan, such as a 401(k), 403(b), or 457 plan 58% 19% 70% Simplified Employee 10% 20% 23% 21% 16% 52% 18% 19% Total With Plan 20% Less Than 10 Years 22% 10–19 Years 25% 20 Years or More INSTITUTE ho we are 24% (percentage of workers) (percentage of retirees) ® 21% 22% 22% 60% to contribute to, to encourage, and to enhance the development of sound employee benefit Sponsor Nonsponsor Sponsor Nonsponsor Sponsor Very Nonsponsor Having enough money to live comfortably throughout retirement years W Have faith, believe in the system 24% 33% 539% –20 19%21–100 19% 12% 5–20 8% 21–100 Regular savings or investments set aside for retirement 24% 21% So let’s play ball! So let’s play ball! Confident 66 Confident Confident Confident So let’s play ball! So let’s play ball! So let’s play ball! A work-related retirement savings plan, such as a 401(k), 403(b), or 457 plan Regular savings or investments set aside for retirement 24% 29% 62 66 80% Having enough money to live comfortably throughout retirement years 23% 31% 23% 21% Ages 54 or younger 5% Provided by 15% Very Somewhat Not NotConfident An increase in the business’ profits Total 5–20 Employees 44% 21 30% –100 Employees 25% http://www.ebri.org Total Employees Employees Total Employees Employees Having enough money to take care of basic expenses 80% programs and sound public policy through objective research and education. EBRI is the only private, nonprofit, It will always be there, the government will take care of us 36 45 13 14 20 5 Will have enough money to live comfortably throughout their retirement years An individual retirement account (IRA) 32% 54 Having enough money to live comfortably throughout retirement years An individual retirement account (IRA) 13% 32% 34% 46 20% Jun. and Small Employer Retirement Sur Less than 1 year An individual retirement account (IRA) 6% 11% 3% vey (SERS) 40 4% RESEARCH Having enough money to take care of basic expenses 33 36 14 15 Introduction ..................................................................... 3 Table 8, Expected and Actual Retirement Age: 2001 .. 11 Less than 50% 19% 17% Ages 55–59 12 Employer 16 Effective Effective Effective Used A plan with low administrative costs that requires no employer contributions 35 32 33 Approximate Gross Annual Revenue Very Doing a good job of preparing financially for retirement Cash in a safe place at home or safe deposit box Not sure it will be there 26 Doing a good job of preparing 47 9 15 18 3 9 Done needs calculation nonpartisan, Washington, DC-based organization committed exclusively to public policy research and education on 33% 42% 13% Somewhat 10% Having enough money to take care of basic expenses Cash in a safe place at home or safe deposit box 40% 21 41 24 37 14 1–2 years Cash in a safe place at home or safe deposit box 14 28 14 28 9 Doing a good job of preparing financially for retirement 22 42 15 20 If you are married, you and your spouse should each fill out your own Ballpark Estimate worksheet If you are married, you and your spouse should each fill out your own Ballpark Estimate worksheet If you are married, you and your spouse should each fill out your own Ballpark Estimate worksheet If you are married, you and your spouse should each fill out your own Ballpark Estimate worksheet If you are married, you and your spouse should each fill out your own Ballpark Estimate worksheet Traditional Pension/ Age 60 ® 10 5 50–59% 24 8 Business tax credits for starting a plan 14% 401(k) 31% 58% 19% 48% 23 40 36% 78% 37Confident 2001 RCS .......................................................................... Less than $500,000 11% 3 28% Table 9, Percentage of Preretirement Income Needed 14% 30% 6% 9% Employees prefer wages and/or other benefits Having enough money to take care of medical expenses 60% Politicians won’t risk tampering with it, voting retirees will keep an eye on them 19 19% 20% 42 5 11% 23 6 43% Confident 43%12 37% Not done needs calculation Keogh account 14 financially for retirement 41 5 22 22 Doing a good job of preparing financially for retirement 38% 18 30 27 23 economic security and employee benefit issues. EBRI’s membership includes a cross-section of pension funds, Keogh account 3–4 years Keogh account 1338% 23 17 7 6 5 Defined Benefit Plan What’ Having enough money to take care of medical expenses s New? What’s Cool? Destinations Net Search People Software 20 35 22 22 taking your marital status into account when entering your Social Security benefit in number 2 below. taking your marital status into account when entering your Social Security benefit in number 2 below. taking your marital status into account when entering your Social Security benefit in number 2 below. taking your marital status into account when entering your Social Security benefit in number 2 below. taking your marital status into account when entering your Social Security benefit in number 2 below. INSTITUTE 34% 60–69% 13 7 Jul. Ages 61Employee benefit statements –64 SIMPLE plan 13 32% 29 89% 41% 37% 2243% 38%23 8% 19 10% A plan that could really be tailored to the unique needs of your business 60% 43% 23 38 39 Revenue is too uncertain to commit to a plan $500,000–$999,999 19 25 26 18 19 27 6 484 50 5 30 Having enough money to pay for long-term care Depends on the president or government 45% 15 38 5 27 2 16 41% Somewhat Retirement Confidence Having enough money to take care of medical expenses ............................................... 4 13 38% 35 32 19 businesses, trade associations, labor unions, health care providers and insurers, government organizations, and 5–9 years 19 31 and Available in Retirement 21 12.................................... Not Too 11 Having enough money to pay for long-term care 41% 45% 15 47% 23 27 31 by Dallas Salisbury, EBRI, Teresa Turyn, EBRI, 38% Doing a good job of preparing financially for retirement Brochures 55% 20% 51% 85 17 7054 –79% 47% 9 16 19 8 Age 65 Deferred profit-sharing plan 30 14 22 22 21 $1 million, less than $2 million Availability of easy-to-understand information21 14 24 19 13 36 16 46 21 A large portion of workers are seasonal, part time, or high turnover Believe in the president or government 15 13 5 31 32 4 Confident 30 46 1993 31% 21% 47% 18% 12% Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald Confident 1. How much annual income will you want in retirement? (Figure 70% of your current annual gross income just to Having enough money to pay for long-term care Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 10–19 years Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew 23 0 9 2636 34 21 30 service firms. Confidence in Social Security and Confidence in Social Security and Medicare Done needs calculation 40% ............. 5 Table 10, Retirement Confidence Among African- 40 43 11 5 Ages 66 or older Newsletters/magazines 16 12 59 21 8049 –89% 13 10 16 4 A plan with reduced administrative requirements Simplified employee pension (SEP) 13 17 18 35 6 46 It costs too much to set up and administer $2 million, less than $5 million 18 8 12 12 11 7 22 34 28 33 $ 19 42 16% 37% 13% 34% Aug. & Associates, Inc., 2001 Retirement Confidence Survey. 1999 23 50 17 9 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 Retirement Confidence Survey. maintain your current standard of living. Really.) Inc., 2001 Retirement Confidence Survey. 20–29 years Greenwald & Associates, Inc., 2001 Retirement Confidence Survey. 10 0 0 20 Not Too SIMPLE Plan Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 Retirement Confidence Survey. Not done needs calculation 40% 17 90–99% 42 2 19 Not At All 21 1 Never retire Individual access to a financial planner 403(b) 7 NA 57 637 28 4 4 8 30 and Ruth Helman, Mathew Gr Allowing key executives to accumulate more in a retirement plan eenwald & Associates, Inc. 16 28 56 Preparing for Retirement Required company contributions are too expensive $5 million or more ........................................... 8 7 2 Americans 10 4 .................................................................. 10 <0.5 7 416 6 46 10 39 13 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & 0% 2000 28 49 13 10 Confident Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 Retirement Medicare 30 years or more 9 0 0 20 Confident Investment advice 57 32 100% or more 40 7 12 21 51 Demand from employees Money purchase plan 3 4 15 37 3 48 Not reported 23 24 20 22 28 35 2. Subtract the income you expect to receive annually from: Business is too new 1994 38% 1995 1996 1997 1998 1999 6 2000 6 20017 2001 20 20 22 Will have enough money to take care of basic expenses during retirement 20% Associates, Inc., 2001 Retirement Confidence Survey. 37% 37% 36% 2001 27 43 16 13 for emplo 23% 34% yee benefits research Saving—and Not Saving—for Retirement Confidence Survey. Don’t know 7897 ................. 8 18% 17% Table 11, Vehicles Used by African-Americans to Save Sep. 30% EBRI’s work advances knowledge and understanding of employee benefits and their 30% Not At All 19% Source: Employee Benefit Research Institute, American Savings Workbooks/worksheets Thrift savings plan 54 328 40 3 27% 10 26% 3 22 Repeal of top-heavy rules 10 33 (revised) 57 Family-Owned Business Too many government regulations 18% 4 5 2 22 22 26 Done needs calculation 53 36 5 5 suggest that there may also be health-related factors universe of small employers with and without retirement Two-thirds of workers indicate they expect full- Deferred Profit- hat we do 14% 43% minimize these factors, it is difficult or impossible to them as potential plan sponsors (i.e., SIMPLE plans and tage for the business in employee recruitment and 21% 20% 23% major source of income and 48 percent say it will be a Half of Asian-Americans report that an employer This year needs calculation report they have made changes in their according to the preference of the respondent. Data for process, the proportion decreased to 65 percent. 18% Confident • Social Security—If you make under $25,000, enter $8,000; between $25,000 - $40,000, enter $12,000; 20% Contrary to the trend for retirement confidence, which W The Employee Benefit Research Institute (EBRI) regularly samples both public and 19% taxable wage base of $80,400 (about 11 percent of American workers overall to say they are The Role of the Employer Seminars ......................................... importance to the nation’s economy among policymakers, the news media and the public. very 54 confident 10 33 for Retirement (Among Savers) Source: Employee Benefit Research Institute, American Savings 35 8 ................................ 23 14 Education Council, and Mathew Greenwald & Associates, Inc., Employee stock ownership plan (ESOP) 2 (17 percent). With respect to savings vehicles, most The Social Security Administration says Social 1 5 Yes A plan that could be set up and administered completely over the Internet 47 66 52 7 66 19 39 74 67 Don’t know where to go for information on starting a plan 19% 1 1 0 9 9 4 Sharing Plans Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald Having enough money to take Not done needs calculation Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., Dallas Salisbury of EBRI, Teresa Turyn of EBRI, and Ruth Helman of Mathew 25 45 16 14 th over $40,000, enter $14,500 (For married couples - the lower earning spouse should enter either their calculate how much they need to save for a comfort- behind the decline in retirement confidence, as the or part-time employment to be a major (16 percent) or plans, but previous years are not weighted. quantify the errors that may result from them. • enough money to live comfortably throughout their SEPs—the savings incentive match plan for employees, retention. They also report employee-related reasons While the fraction of workers who are th very confident minor source. Six in 10 expect to receive income from an contributed money to a retirement savings account in 2001 Retirement Confidence Survey. Intranet, Internet, or online services 0% 47 38 retirement planning as a result (40 percent). When the minority oversamples are weighted by age, sex, and Education Council, and Mathew Greenwald & Associates, Inc., 2001 30 6 25 Lengthening of vesting requirements Chec It does this by conducting and publishing policy research, analysis, and special reports on employee benefits issues; Keogh plan k Out EBRI’ marks the 11 <0.5 s W 1eb Sit 7 3217%0e! 62 Oct. has declined since 2000, worker confidence in Social Vesting requirements cause too much money to go to short-term employees No employer attitudes on retirement issues. This year marks the 11 & Associates, Inc., 2001 Retirement Confidence Surve 17% 51 33 y. 47 1 <0.5 33 4 359 0 annual Retirement 29 33 41 workers make more than this amount). about having enough money for a comfortable retirement Worker Expectations................................................. 16% 1115% Table 12, Retirement Confidence Among Hispanic- 2001 Small Employer Retirement Survey. savers report having used work-related retirement 13% Security should replace about 40 percent of preretire- care of basic expenses RCS are confident about each of these retirement issues 10% -$ to planning and saving for retirement, 22 percent of MRCS 9% own benefit based on their income or 50% of the higher earning spouse’s benefit, whichever is higher) 1993 Greenwald & Associates, wrote this 1994 1995 8% 1996 1997 Issue Brief 1998 with assistance from the Institute’s 1999 2000 2001 Will have enough money to take care of medical expenses during retirement Retirement Confidence Survey. say their confidence is based on their faith in the system, Videos 6% Established in 1978, the E 20 19 36 mployee B 13enefit Research 32 able retirement, compared with 44 percent of workers holding educational briefings for EBRI members, congressional and federal agency staff, and the news media; and household incomes or less education to report attempting Age of Business Tax benefits for the owner are too small retirement years—23 percent are 1 1 0 16 very1 confident and 8 6 measured decrease in confidence has occurred as public employer through a defined benefit plan (61 percent). their name or in their spouse’s name last year (51 per- minor (52 percent) source of income in their retirement. In theory, each sample of 300 yields a statistical anniversary of asked about the changes they have made, most cite education to reflect the actual proportions in each and simplified employer pensions). In addition, while as important, such as a positive impact on employee in their overall retirement income prospects has The RCS was co-sponsored by the Employee 1993 38 43 12 5 Security and Medicare has continued to increase steadily Confidence Survey (RCS), and the fourth annual Minority RCS and Small Employer (33 percent vs. 22 percent), although both groups are RCS Methodology Only one-third of all Hispanic-American workers 0% ...................................................... 12 savings plans (70 percent) and regular savings or Americans ment earnings of average earners; 80 percent for the .................................................................. 15 51% 41% 6% 2% African-American workers reply that they are on track EB Done needs calculation Computer software RI 15 45 except long-term care. 27 11 42 12 18 32 12 401(k) Plans Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald • Traditional Employer Pension – a plan that pays a set dollar amount for life, where the dollar amount Less than 5 years Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 research and editorial staffs. Any views expressed in this report are those of the 10 17 11 17 8 Small 20 The possibility of being held liable for investment decisions made by employees Source: Emplo sponsoring public opinion surveys on employee benefit issues. yee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 <0.5 EBRI’s Education and Research Fund 0 2 12 Retirement 11 (EBRI-ERF) 17 in the government, or in voters keeping an eye on Introduction 1999 31 50 13 5 Nov. a retirement savings needs calculation. Similarly, overall. 1993 1994 1995 1996 1997 Benefit Research Institute (EBRI), a private, nonprofit, 1998 31 percent are 1999 somewhat 2000 2001 confident (table 10). Seven in attention to the high cost of prescription drugs and long- Three in 10 plan on funding their retirement with the cent), and half say they are offered a retirement savings This contrasts sharply with the experience of retirees, precision of plus or minus 6 percentage points (with the Retirement starting to save more, changing the allocation of their minority population ages 25–64. most small employers with plans report real business attitude and performance. However, small employers consistently been increasing over the years (from from the lows measured in 1995. This year, one-third of Not done needs calculation Retirement Survey (SERS). Institute (EBRI) is the only nonpr 13 35ofit, nonpar 25 tisan -$ 25 report that they or their spouse have tried to figure out 2001 MRCS equally likely offer a .................................................................... very & Associates, Inc., 2001 Small Employer Retirement Survey. confident response for the 12 Table 13, Vehicles Used by Hispanic-Americans to Confidence Survey. investments set aside for retirement (62 percent). Fewer lowest earners; and 27 percent for those at the maximum depends on salary and years of service (in today’s dollars) Other 5–9 years Employer Retirement Survey. 11 20 12 9 9 20 7 89 8 17 6 and 3 percent reply that they are ahead of schedule. performs the charitable, educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization 2000 40 44 9 7 Underwriters authors and should not be ascribed to the officers, trustees, or other sponsors of Underwriters politicians (table 3). Nevertheless, some of those who are www.ebri.or married workers are more likely than those who are not g workers (58 percent) (table 16). They are less likely to term care has increased. For instance, 51 percent of just 2 in 10 of whom report that employment is a major • 95 percent certainty) of what the results would be if all Asian-Americans are more likely than workers in Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., nonpartisan public policy research organization; the advantages from sponsoring a retirement plan for their that do not sponsor a plan do not report negative 10 are 18 percent in 1993 to 25 percent in 2000), the propor- very or somewhat confident of having enough proceeds from the sale of a home or business (29 per- plan by their current employer (51 percent). Of those Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 money, or investing their money. third have offered a plan for less than five years (33 per- In theory, each sample of 200 yields a statistical 10–19 years Confidence 31 24 34 25 24 19 workers report they are confident that the Social Secu- EMPLOYEE -$ how much money they will need to have saved by the other confidence questions. In particular, Asian-Ameri- African-Americans .................................................... 13 Save for Retirement (Among Savers) 2001 37 41 ....................... 12 1016 • Part-time income say they have used IRAs (40 percent) (table 13). taxable wage base of $80,400 (about 11 percent of supported by contributions and grants. The American Savings Education Council (ASEC) and the Consumer Health Planning for Retirement For many retirees, this earlier retirement was —On average, Hispanic-Ameri- als to this delivery method, worker reports of employer- 0% 20% 40% 60% 80% 100% However, the large majority feel they are behind sched- are asked more detailed questions about the retirement organization committed to original public policy done a retirement needs calculation are not only more Dec. Retirement Confidence Surve EBRI, EBRI-ERF, or their staffs. Neither EBRI nor EBRI-ERF lobbies or takes y. Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 2001 Retirement Confidence Survey. Retirement Confidence Survey. confident express reservations. general to indicate they or their spouse have person- 20–29 years 17 15 married to have tried to do one. The decline from 2000 to 18 16 15 15 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 money for basic expenses in retirement (69 percent), Small Employer Retirement Survey. offer a savings incentive match plan for employers those who retire early say it is for a medical reason, and cent). (6 percent) or minor (12 percent) source of retirement who are offered a plan, 83 percent say they contribute companies with five–100 full-time workers were sur- American Savings Education Council (ASEC), a partner- precision of plus or minus 7 percentage points (with cent) (table 17). The smaller the employer, the more workers, such as greater ability to recruit and retain impacts by not offering their workers a retirement tion decreased to 22 percent in 2001 (there was a -$ Survey (RCS), rity system will continue to provide benefits of at least 29 Key 2001 RCS findings include: time they retire so that they can live comfortably in can college graduates are more likely than college Hispanic-Americans Education Council (CHEC) are programs of EBRI-ERF. They are coalitions of private- and public-sector institutions .................................................. 15 • Other Table 14, Retirement Confidence Among Asian- workers make more than this amount). Thirty-six percent report that an employer can workers expect to retire around age 63, although planning process before being asked whether they have provided materials may continue to decrease. BENEFIT not by design. Four in 10 of today’s retirees say they likely than those who have not to be saving for retire- ule—25 percent say they are a little behind and 48 per- 30 years or more positions on specific policy proposals. EBRI invites comment on this research. 28 21 23 20 41 31 Having enough money to take 2001 in the percentage of workers saying they have tried AARP ally saved money for retirement (78 percent vs. research and education on economic security and AARP ship of private- and public-sector institutions dedicated while nearly two-thirds are confident that they are doing confidence in having the funds for medical expenses or (SIMPLE plan) (22 percent), deferred profit-sharing plan money to it. income. Current workers are more than twice as likely to and the fourth anniversary of the Minority RCS and veyed with complete accuracy. There are other possible public policy challenge. In a completely voluntary (on the More than one-third of African-American with the goals of public education on saving, retirement planning, health insurance, and health quality. Very Familiar Somewhat FamiliarSaving for Retirement 95 percent certainty) of what the results would be if all likely they are to report offering a plan for less than five good workers and/or a positive effect on employee plan. Not T corresponding increase in those who are oo Familiar Never Heard Of —Fifty-four percent of African- not at all a positive impact on their ability to attract and retain equal value to the benefits received by retirees today • The percentage of respondents saying they have personally saved for retirement retirement (32 percent). Among native-born Hispanic- graduates overall to say they are Asian-Americans ....................................................... very confident they will 16 Americans .................................................................. 17 contributed money to a retirement savings account in Forty-eight percent of Asian-American workers 2001 Confidence in Social Security, but not in Medi- household incomes of less than $50,000) expect that retired earlier than planned (39 percent). This is fre- one-fourth anticipate retiring at age 65 (24 percent), =$ different types of workers (table 21). Employees in cent say they are a lot behind. Could they save more? saved money for retirement, however, the proportion Recipients of each type of material or opportu- ment (79 percent vs. 55 percent), they tend to have care of medical expenses allow them to start a plan within the next couple of This is how much you need to make up for each retirement year: This is how much you need to make up for each retirement year: This is how much you need to make up for each retirement year: This is how much you need to make up for each retirement year: This is how much you need to make up for each retirement year: RESEARCH to do a retirement needs calculation occurs among all (22 percent), or simplified employee pension (SEP) Aetna Financial Services for long-term care was found to be low. say they expect to work in retirement (61 percent) as sources of error in all surveys, however, that may be 69 percent). African-Americans and Hispanic-Ameri- • Aetna Financial Services to raising public awareness of what is needed to ensure attitude and performance, their peers without plans It appears that many small nonsponsors are unaware a good job preparing financially for their retirement confident from 10 percent in 2000 to 17 percent in workers who expect to retire think that at least 50 per- Preparing for Retir When it comes to planning and saving for ement American workers report that they or their spouse have members of each minority group age 25 and over were years (38 percent of employers with five–20 workers; Small Employer Retirement Survey (SERS). A clear part of employers) system that involves a number of Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 quality employees and on the attitude and performance Small Employer Retirement Survey. (34 percent, up from 19 percent in 1995 and 28 percent decreased in the past year, from 75 percent in 2000 to 71 percent in 2001. When asked Americans, however, this percentage is statistically have enough to live comfortably. MRCS Methodology .................................................. 18 Table 15, Vehicles Used by Asian-Americans to Save 1993 21 33 23 20 care, has a strong relationship to age. While almost 6 in employee benefits.their name or in their spouse’s name last year (compared report that they or their spouse have tried to figure out • They were automatically enrolled (4 percent). between 20 percent and 39 percent of their preretire- quently due to negative reasons beyond their control, 12 percent expect to retire at age 66 or later, and 6 per- nity were asked to rate its effectiveness (table 7). These companies without plans tend to be younger, have lower decreases further to two-thirds of all workers (65 per- Two-thirds say it is possible for them to save $20 per years. The Role of the Employer accumulated larger amounts. those who have tried to do a calculation than among planning and saving for retirement (table 5). Those who Source: Emplo cans are less likely than workers in general to indicate yee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 demographic groups. Small Employer Retirement Survey. 2 (64 percent). More than half are confident that they will 1999 16 41 27 15 (13 percent). Only a few offer a 403(b) (6 percent), money Aid Association for Lutherans cent of their preretirement income will be replaced by retirees are to indicate that they actually worked retirement, 36 percent of Asian-American workers feel rules and regulations, 79 percent of full-time employees more serious than theoretical calculations of sampling The results of this survey indicate that future AT&T long-term personal financial independence and part of personally saved for retirement, compared with 69 per- surveyed with complete accuracy. There are other 22 percent with 21–100 workers). While small employers appear largely unaware of these direct potential business of these potential business benefits from retirement 2001). message that permeates the findings of these surveys is of their employees. Many also feel an obligation to in 2000) (chart 2). INSTITUTE Likewise, 4 in 10 are confident that more detailed questions about the retirement planning process before being asked than in recent years. equivalent to the 44 percent reported for all workers in 2001 SERS respondents report the most important reason they offer ..................................................................... Now you want a ballpark estimate of how much money you’ll need in the bank the day you ® EBRI Issue Briefs 18 confidence in recent years, roughly two-thirds of those are monthly periodicals providing expert evaluations of 10 of those age 55 or older are confident that Social with 46 percent of native-born Hispanic-Americans and for Retirement (Among Savers) are seasonal, part time, or high turnover. how much money they will need to have saved by the ................................ 18 • It is the maximum amount allowed by law (4 percent). cent think they will never retire. (The current normal earnings, have less formal education, and remain with workers are most likely to say the computer software week more than they are currently saving for retirement cent). (Sixty-nine percent say they or their spouse have ment income will be replaced by money from Social such as health problems (51 percent), changes at their Six in 10 workers report they are currently What would lead to increased plan coverage? 3 those who have not, particularly with respect to medical While the past few years have seen many Americans ? ur publications About EBRI EBRI’s overall goal is to pr report trying to do a retirement needs calculation remain 2000 omote soundly con- 24 42 19 13 Employee Benefit Research Institute Two in 10 of the 2001 respondents who indicate American Council of Life Insurers purchase plan (3 percent), thrift savings plan (3 percent), that they have saved for retirement (54 percent and O National Council of La Raza the EBRI Education and Research Fund; and Mathew have enough money to take care of medical expenses educational efforts need to focus on getting workers to money from Social Security (36 percent), another third (26 percent). they are on track and 9 percent feel they are ahead of the need for financial education and information. error. These include refusals to be interviewed and other at employers with more than 100 workers were covered retire. So the accountants went to work and devised this simple formula. For the record, 1 cent of workers overall. Nevertheless, there appears to possible sources of error in all surveys, however, that are most likely to start a retirement plan within their • benefits. These results highlight the need for education plan sponsorship. Contrary to the downward trend in retirement employee benefit issues and trends, as well as critical analyses of employee provide a retirement plan for their workers or report the Medicare system will continue to provide benefits of a plan is for the competitive advantage for the business whether they have saved for retirement, the proportion decreases further to two-thirds the United States. The proportion reporting doing a Planning for Retirement Retirement Plan Sponsorship In the past year, the proportion of workers —The typical Asian-American .................................. who 19 Table 16, Type of Defined Contribution Plan Offered, who are confident have consistently been More than one-third of workers report that an employer somewhat 49 percent of all workers). Forty-seven percent say they time they retire so that they can live comfortably in • Security will continue to provide benefits of equal value They picked a number or guessed (4 percent). Security. On average, older respondents expect that company (25 percent), or other work-related reasons Social Security retirement age is 65, and is gradually 2001 Revenue uncertainty and the perceived cost of a 20 38 22 19 the company for less time. The differences are especially (66 percent), and 10 percent of those who could save this (45 percent) and employee benefit statements (43 per- saved money for retirement.) saving for retirement (61 percent), and 9 in 10 of those Nonsponsors were read a list of items and asked if any expenses and long-term care. In 2001, 69 percent of those become more proactive about their retirement planning, more likely than those who have not to say they are on they figure you’ll realize a constant real rate of return of 3% after inflation, you’ll live to ? Benefit they have tried to do a retirement needs calculation Aon Consulting calculate how much they need to save and accumulate or employee stock ownership plan (ESOP) (2 percent). forms of nonresponse, the effects of question wording and 50 percent, respectively). benefit policies and proposals. Each issue, ranging in length from 16 Nationwide Financial Greenwald & Associates, Inc., a Washington, DC-based of employers in order to expand plan sponsorship. (55 percent), and almost 4 in 10 are confident they will confidence, worker confidence in Social Security and –28 pages, thoroughly explores one topic. EBRI expect that Social Security will replace 20 percent to schedule. Half feel they are behind schedule—26 percent be little difference in the percentage saving for retire- may be more serious than theoretical calculations of first few years of operation, they may decide to begin by one or more employment-based retirement plans in EBRI For the first time in several years, the RCS ceived employee benefit programs. EBRI does not that they offer a plan because of the tax advantages it at least equal value (39 percent, up from 21 percent in in employee recruitment and retention (25 percent). of all workers (65 percent). retirement savings needs calculation is also similar for worker expects to retire at about age 65, although Obstacles to Plan Sponsorship ................................. 21 has provided them with educational material or semi- by Size of Business (Among Employers Offering are very or somewhat confident of having enough money (58 percent), roughly 2 in 10 of those ages 25–34 say they confident rather than are offered a retirement savings plan by their current retirement plan are also important issues. Nearly 2 in 10 retirement. This makes them as likely as workers overall very confident. When respondents • They decided on a percentage of earnings (4 percent). Social Security will replace a larger share of their (25 percent). The youngest retirees—those born in 1933 being raised to 67.) While more than 4 in 10 are unable cent) they received are very effective. In addition, large between sponsors and nonsponsors with 21–100 amount report that they would not need to sacrifice The amounts accumulated for retirement by would make them seriously consider sponsoring a who have personally saved for retirement are currently who have attempted a calculation and 48 percent of findings from the 2001 RCS suggest that this trend has age 87, and you’ll begin to receive income from Social Security at age 65. track or ahead of schedule. Notes is a monthly periodical providing current information on a variety of employee benefit topics. EBRI’s Washington workers are less likely than those with 21–100 workers • Approximately half of workers overall and in each of SIMPLE plans, and 11 percent said they were not too report figuring that they need to save less than $250,000 Fundamentals have enough money to pay for long-term care (38 per- Having enough money to pay AT&T for retirement. Such an exercise appears to motivate 49 percent of their preretirement income (35 percent), say they are a little behind and 22 percent say they are a reports a downward trend in the percentage of individu- 1997, according to data from the U.S. Bureau of Labor question order, and screening. While attempts are made Businesses with 21–100 employees are more OppenheimerFunds market research firm. ment when African-American workers are compared sampling error. These include refusals to be interviewed offering a plan at any time. Small employers that have Medicare has continued to increase since 1995, The issue of low plan sponsorship among small The message from the surveys’ results is clear: Table 21 “To contribute to, to encourage, and offers employees, key executives, or the business owner. RCS Methodology 1995 and 35 percent in 2000) (chart 3). The majority of Hispanic and non-Hispanic college graduates and for to live comfortably throughout their retirement years 32 percent anticipate retiring at age 60 or before. (The Roughly 2 in 10 cite the positive effect on employee Comparative Profiles ................................................ 22 to the 1995 RCS were asked what they meant when they nars about retirement planning and saving in the past are confident (22 percent). employer. Of those who are offered a plan, 72 percent say a Defined Contribution Plan) say their most important reason for not offering a plan is (44 percent) to report doing a retirement savings needs ................................... 19 EMPLOYEE to estimate how long they will spend in retirement employees. one-third or more report finding online services (38 per- anything in order to do so. workers as a whole are generally small (table 6). The lobby or endorse specific appr preretirement income than younger respondents do. or later—are especially likely to report retiring before saving (89 percent). Almost two-thirds of those who have oaches. Rather, it pro- Bulletin provides sponsors with short, timely updates on major federal developments in employee benefits. retirement plan (table 23). Almost half say an increase in EBRI’s those who have not are confident of having enough for long-term care undergone a reversal in the past year. In 2000, more In this year’s survey, half of those who have 5 (20 percent), 1 in 10 each figure they need to save $ to say the following are the most important reasons for CIGNA Retirement and Investment Services likely than those with 5–20 employees to provide 401(k)s the minority groups say they are offered a retirement Employee Characteristics of Sponsors and Nonsponsors, by Size of Business Principal Financial Group familiar with them (compared with 34 percent and cent).The 2000 RCS data collection was funded by positive behavior changes among all workers. Further- and 2 in 10 think it will replace less than 20 percent lot behind. Could they save more? Three-fourths say it is als who say they have personally saved for retirement. to minimize these factors, it is difficult or impossible to Statistics’ Employee Benefits Survey. ? Fellows Retirement plan employers may be attributed to the fact that nonsponsors with all workers in the United States with similar and other forms of nonresponse, the effects of question been in business for less than 10 years are most likely to More and better education programs are needed and although the majority continue to remain not confi- However, many nonsponsors do not feel a competitive workers, however, continue to be not confident that these attitude and performance (19 percent) and employer • The percentage of respondents who say they have tried to calculate how much money 3. To determine the amount you’ll need to save, multiply the amount you need to make up by the factor below. Hispanics and non-Hispanics ages 35–44. has decreased from more than 7 in 10 to less than two- current normal Social Security retirement age is 65, and Potential Motivators ................................................. 24 Table 17, Length of Time Offering Some Type of said they were only 12 months (35 percent). This represents a decrease from somewhat confident, the most to enhance the development of sound they contribute money to it. calculation. BENEFIT Workers who are offered a retirement savings Many workers greatly underestimate the Fundamentals of Employee Benefit Programs offers a straightforward, basic explanation of employee benefit programs age 60 or retiring earlier than expected. If current that revenue is too uncertain to commit to a plan (18 per- (43 percent), the median expectation for those who are Why are workers not confident about Social 1993 na na na na cent), individual access to a financial planner (37 per- majority have saved less than $50,000 (50 percent), and Sponsors are more likely to report that having a saved say they automatically save a predetermined the company’s profits would make them much more money for medical expenses (compared with 82 percent than half of workers said that they had tried to calculate attempted to do the calculation report that they have This publication is available for purchase online. Visit www.ebri.org/publications or call not offering a retirement plan: having a larger portion of These findings are part of the 11th annual Retirement savings plan, such as a 401(k), by their employer. vides balanced analysis of alternativ 13 percent, respectively, in 2001). This is not the case between $250,000 and $499,999 (11 percent) and be- es based on the (78 percent vs. 48 percent), but they are less likely to more, while all workers may not do this successfully, the Fidelity Institutional Retirement Services Co. quantify the errors that may result from them. continue to remain unfamiliar with the different plan Prudential Retirement Services grants from 26 public and private organizations, with should be part of any long-term efforts focused on dent. While African-American workers are as likely as (22 percent). Eight percent do not know how much of possible for them to save $20 per week more than they income characteristics. wording and question order, and screening. While report offering a plan for less than five years (62 per- The changes in individual attitudes and behavior participation is notably lower among small employers, Age you expect to retire: 55 Your factor is: disadvantage, and work force differences make it likely 1999 21.0 na na na na programs will continue to provide benefits equivalent to obligation to provide a retirement plan for employees ? How to Join EBRI they need for retirement in order to live comfortably dropped from 51 percent in 2000 is gradually being raised to 67.) Two in 10 are unable to SERS Methodology Forty-six percent of those who have done a in the private and public sectors. .................................................... The EBRI 24 Databook on Employee Benefits the high of 41 percent reported in 1999. Workers who Retirement Plan, by Age of Business is a statistical reference volume on employee ....................... 20 thirds (72 percent in 2000, 63 percent in 2001). Similar amount they will receive from Social Security when they frequent response was that they should have enough cent), while 6 percent say their business is too new How do Hispanic-American workers assess their Among those who have done a retirement needs plan but do not contribute money to it most often say the RESEARCH Security and Medicare? Many say they are not confident workers follow the pattern set by today’s retirees, many able to provide an estimate is 20 years in retirement. cent), seminars (33 percent), and investment advice Total 5–20 Employees 21–100 Employees retirement plan has an impact on their business than 2 in 10 say they have nothing saved (19 percent). While likely to consider a plan (44 percent) and more than one- employee benefit programs and amount each pay period or each month (64 percent), but and 49 percent, respectively, in 2000), and 57 percent of how much money they needed to save by the time they made changes in their retirement planning as a result Hispanic-Americans Confidence Survey (RCS), a survey that gauges the views (202) 659-0570. workers that are seasonal, part time, or high turnover However, African-Americans (32 percent) and His- 60 with SEPs, for which there has been little change tween $500,000 and $999,999 (11 percent), and 2 in 10 2000 18.9 16 35 29 19 American workers overall to be confident about the provide SEPs (6 percent vs. 17 percent). The distribution Goldman Sachs & Co. mere act of performing a retirement needs calculation their preretirement income will be replaced by Social are currently saving for retirement (75 percent, com- regarding retirement confidence may be attributed to however. According to data from the Bureau of Labor The SERS is co-organized by the Employee options that are available to them and what the various T. Rowe Price Associates staff time donated by EBRI, ASEC, and Greenwald. RCS attempts are made to minimize these factors, it is cent), but one-third of employers in business for 10–19 • improving American workers’ retirement security The normal retirement age for full Social Security Half of African-Americans are currently saving benefit programs and work force related issues. that many do not feel the same obligation or experience those received today (65 percent for Social Security; to 46 percent in 2001. When respondents were made aware of the components of a retirement needs calculation report they have made decreases are found among those who are confident that Conclusion estimate how long they will spend in retirement (21 per- (16 percent). In addition, a total of about 2 in 10 mention Characteristics of ...................................................................... ? Media facts. Through its activities, EBRI is able to fulfill its 25 money to live comfortably in retirement if everything receive educational materials tend to report more retire. Twelve percent of workers who plan to retire state Table 18, Reasons for Offering a Retirement Plan, progress when it comes to planning and saving for (15 percent of employers in business for less than calculation, 4 in 10 state that they have made changes in reasons they do not contribute are: INSTITUTE Hispanic-Americans expect to fund their retire- nonsponsors are to report that not having a plan has an (32 percent) very effective. the median amount accumulated generally increases ® because the system is going bankrupt, with too many are also likely to retire earlier than planned and for others cite less systematic methods as the primary third say a plan with low administrative costs that those who have attempted a calculation and 34 percent 2001 15 29 26 28 retire so that they can live comfortably in retirement 65 (50 percent). Of these, 53 percent say they have started 16.4 and attitudes of working-age and retired Americans 6 sound public policy through say they need to save $1,000,000 or more (19 percent). (13 percent vs. 31 percent) and it costs too much to set up Hewitt Associates of defined contribution plans is not statistically different can itself be an educational process and involve a certain Benefit Research Institute (EBRI), a private, nonprofit, panic-Americans (36 percent) are less likely than Most Full-Time Employees Sponsor Nonsponsor(55 percent and 12 percent in 1998, compared with Vanguard Group materials and a list of underwriters may be accessed at prospects. Furthermore, the education of potential plan financial aspects of retirement, they tend to be more Sponsor Nonsponsor Sponsor Nonsponsor Security. In addition, one-third think they will receive pared with 59 percent for all workers). Of these, 14 per- recent declines in consumer confidence, employment, the Statistics’ Employee Benefits Survey, 46 percent of full- options entail in terms of cost and administration. The for retirement (49 percent, compared with 61 percent of difficult or impossible to quantify the errors that may years and 2 in 10 in business for 20 or more years also benefits is rising from age 65 to 67, but 55 percent the same demand for a retirement plan or tax-deferred 57 percent for Medicare). some type of tax advantage, either for their employees retirement needs calculation, the number decreased further to 39 percent. changes in their retirement planning as a result. When they are doing a good job of preparing for retirement RCS Underwriters cent), but the median expectation for those who are able ......................................................... 28 goes right. Fluctuations in the stock market and other proactive retirement planning and savings behavior than by Size of Business .................................................... 20 ? Members Only retirement? Twenty-seven percent report they are on their retirement planning as a result (41 percent). When • they will get nothing from Social Security, even after Retirement Confidence They can’t afford to or they need the money for —Nearly half of Hispanic-Ameri- retirees and not enough workers paying into the system. reasons beyond their control. 10 years cite this reason.) Twelve percent say set-up and ment in a number of different ways. Many think they or impact. In particular, 85 percent of sponsors report with age ($4,000 for ages 25–34; $10,000 for ages 70 strategy they use to save for retirement. Approximately 13.6 required no employer contributions would make them of those who have not are confident of having enough for (51 percent). This year less than half indicate they have mission to advance the public to save more, 24 percent have changed the allocation of ’s, the media’s, and and administer (11 percent vs. 22 percent). They are regarding retirement, their preparations for retirement, Asian-Americans (51 percent) and workers overall 52 percent and 16 percent in 2001). Respondents who say However, a sizable minority are unable to provide the degree of information gathering. This explains the Lucent Technologies from the 1998 SERS, except that businesses with 21–100 nonpartisan public policy research organization; the results also indicate that nonsponsors appear to be Watson Wyatt the ASEC and EBRI Web sites: www.asec.org or sponsors about the advantages of plan sponsorship, likely to say they are expect to reach full eligibility sooner than they not at all confident about having money from other government programs (33 percent, cent report that they would not need to sacrifice any- objective research and education.” all workers). Six in 10 savers say they automatically save result from them. say they began offering a retirement plan less than five economy, and the equity markets. time workers in small private establishments were income. Motivators that appear to be most effective Source: Employee Benefit Research Institute, American Savings Education (9 percent), the business owner (7 percent), or key asked about the changes they have made, they are most MRCS Underwriters to provide an estimate is 20 years in retirement. ...................................................... 28 Table 19, Reasons for Not Offering a Retirement Plan, those who do not receive these materials. Among other (77 percent in 2000, 70 percent in 2001) and those who being probed as to whether they really believe they will can workers are confident that they will have enoughContact EBRI Publications, (202) 659-0670; fax publication orders to recent economic events may mean that, for some at least, track, while 6 percent report they are ahead of schedule. administration costs are the most important reason, and asked to describe the changes they have made, most current obligations (29 percent). Age Others say they are not sure it will be there or do not their spouse will work—27 percent say employment will Overall, a majority of workers expect to spend at ? Programs having a plan has an impact on their ability to hire and 35–44; $36,740 for ages 45–54; $33,980 for ages 55 and much more likely to consider it (35 percent). Approxi- 1 in 10 each indicate they save whatever is left over at long-term care (compared with 65 percent and 34 percent W tried to do this calculation (46 percent) (chart 4). When orker Expectations their money, while smaller percentages have made other +$ 4. If you expect to retire before age 65, multiply your Social Security benefit from line 2 by the factor below. their confidence with regard to various aspects of retire- ubscriptions/orders Council, and Mathew Greenwald & Associates, Inc., 2001 Retirement more likely to cite revenue uncertainty (19 percent vs. (49 percent) to report that an employer contributed their business has considered offering a retirement plan result of their retirement needs calculation (30 percent), enough money to take care of basic expenses (15 percent MetLife employees are more likely than previously to say they finding that workers who have attempted such a calcula- compared with 25 percent for all workers). Finally, thing in order to save this amount. American Savings Education Council (ASEC), a partner- covered by a retirement plan in 1996. The RCS further reports a downward trend from S policymakers’ knowledge and understanding of em- largely unaware of the business and employee-related www.ebri.org/rcs a predetermined amount each pay period or each month years ago (34 percent and 18 percent, respectively). options, and benefits is every bit as important as is the actually will be, and 20 percent admit they do not The RCS is co-organized by the Employee (202) 775-6312. Subscriptions to among current nonsponsors are those that increase the EBRI Issue Briefs are included as part of Under age 30 • The percentage of today’s workers who feel confident that they will have enough money 14% 22% 14% 21% 14% 27% likely to mention starting to save more and changing the are confident in having enough money to pay for basic SERS Underwriters executives (6 percent), as the most important reason. A majority of Asian-Americans expect that one ....................................................... 28 things are not going right at the moment. actions, they are more likely to say they have tried to do get nothing or whether they think it will only be a small money to live comfortably throughout their retirement The majority feel they are behind schedule—30 percent by Size of Business 10 percent cite the expense of required company contri- mention starting to save more, investing their money, or .................................................... 21 • They are not eligible for the plan (11 percent). 2 be a major source of income and 42 percent say it will be retain good employees (compared with 39 percent of over), only one-fourth of those ages 45–54 (24 percent) have faith in the system, the government does a poor job least 20 years in retirement. One-fourth think their the end of the pay period or the end of the month (10 per- Under current law, the normal retirement age is being phased up from age ? Publications mately 2 in 10 each say they would be much more likely Confidence Survey. in 2000). Three-fourths of those who have tried to do a respondents are made aware of the components of a Age you expect to retire: 55 Your factor is: changes. 8.8 ment, and related issues. The survey was conducted in and 7 percent report they could not do the calculation. 6 percent). In addition, they are more likely to say a offer a SIMPLE plan (19 percent, up from 8 percent in MFS Retirement Services, Inc. tion appear to be doing a better job of preparing for ship of private- and public-sector institutions dedicated money to a retirement account in their name or their Ages 30–EBRI membership, or as part of a $199 annual subscription to 39 46 44 benefits reported by small employers sponsoring retire- are more likely than others to report they are very or education of workers regarding the need to plan and save vs. 10 percent) and about doing a good job of preparing 44 EBRI Notes and 43 EBRI Issue Briefs. 51 Individual copies are 58 African-Americans, like other minority groups, tend to be the past several years in the proportion of workers who The fourth annual Small Employer Retirement (60 percent), but others report less systematic methods. Benefit Research Institute (EBRI), a private, nonprofit, know when they will be eligible. Small employers of all sizes provide similar affordability of retirement plans—an increase in busi- 7 In general, there has been little change across to live comfortably in retirement decreased from 72 percent in 2000 to 63 percent in Site Map Search allocation of their money. expenses during retirement (84 percent in 2000, 78 per- Ballpark E$timate source of funding for their retirement will be employ- 65 to age 67. In effect, this is a cut in the total value of future benefits for ......................................................... 29 Table 20, Business Characteristics of Sponsors and a retirement needs calculation (53 percent vs. 32 per- Other confidence indicators have also fallen after The majority of today’s workers will not be eligible to say they are a little behind and 35 percent say they are a changing the allocation of their money. • percentage of their preretirement income. Another years—13 percent are They have not worked for their employer long enough very confident and 32 percent are ployee benefits and their impor in administering the system, and the government retirement will last 20–24 years (26 percent), 9 percent butions. a minor source. Six in 10 expect to receive income from tance to our nation’s nonsponsors that report not having a plan has an and age 55 and over (23 percent) report having saved 60 cent) and save when they feel they can afford to (12 per- 4.7 to consider a plan if there were business tax credits for calculation (75 percent) and 55 percent of those who have retirement needs calculation through questions about Age 40 or older 34 30 36 32 30 13 ? What's New available with prepayment for $25 each (for printed copies) or for $7.50 (as an e-mailed electronic file) by calling major reason for not offering a plan is that the tax January and February of 2001 through 20-minute spouse’s name last year. somewhat familiar with SIMPLE plans (64 percent vs. The large amounts that need to be saved do not Milliman & Robertson, Inc. retirement. 1998) and less likely to offer a deferred profit-sharing to raising public awareness of what is needed to ensure affected individuals. However, a test of question wording suggests that ment plans. • for their own retirement. for retirement (20 percent vs. 13 percent). However, The percentage of respondents who say they have For the fourth more likely than all workers to expect monetary support Two in 10 save when they feel they can afford to (20 per- nonpartisan public policy research organization; the reasons for having a retirement plan (table 18). When have tried to determine how much they need to save for Survey (SERS) is an in-depth survey of retirement plan ness profits, plans with low administrative costs that MRCS Methodology the four waves of the SERS in the percentages saying 2001. At the same time, the percentage of workers who are not at all confident in having ment—21 percent say it will be a major source of cent) and to have made changes as a result of doing the Nonsponsors, by Size of Business ............................ 23 cent in 2001). 17 percent think they will get less than 20 percent of somewhat receive full retirement benefits from Social Security until confident (table 12). More than 6 in 10 are several years of steady increases. In 2000, 77 percent of lot behind. Yet 6 in 10 say it is possible for them to save While few employers say that one of the other © 2001. (9 percent). Annual Salary borrows from the programs and puts the money toward believe it will last 25–29 years, and nearly 2 in 10 expect SERS an employer through a defined benefit plan (59 percent). impact), and 85 percent of sponsors report having a plan $100,000 or more. Respondents with more formal starting a plan (23 percent), a plan that could really be cent). Two percent save unanticipated income or gifts as not are confident of having enough money for a comfort- how much of their preretirement income they will need respondents understand the phrase “equal value” to mean “an equal level of EBRI or from www.ebri.org. Change of Address: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037, (202) telephone interviews with 1,000 individuals (762 workers economy. 5. Multiply your savings to date by the factor below (include money accumulated in a 401(k), IRA, or similar benefits for the owner are too small (18 percent vs. • Seven in 10 workers in each of the minority groups 47 percent) and SEPs (41 percent vs. 28 percent). Saving seem to discourage workers about their retirement —and Not Saving—for Retirement confidence among the different demographic segments of plan (21 percent, down from 31 percent in 1998). mPower from children or other family members (37 percent vs. retirement. When respondents were made aware of the long-term personal financial independence, and a part of sponsorship among small employers (companies with five cent) and approximately 1 in 10 save whatever is left American Savings Education Council (ASEC), a partner- small employers are given a list of reasons why compa- tried to calculate how much money they need for These data indicate that any future educational This Issue Brief discusses the key findings from year, additional Less than $20,000 11 27 require no employer contributions, and business tax 12 26 8 39 enough money for retirement nearly doubled (10 percent in 2000; 17 percent in 2001). Saving for Retirement retirement income and 48 percent say it will be a minor each of these is a most important or major reason. Workers are less likely in 2001 than in 2000 to —Half of Hispanic-American workers were confident that they were doing a good job calculation (66 percent vs. 37 percent). They are also their preretirement income from Social Security (15 per- Employee very they are age 67, but most continue to be unaware of this benefits” in this context or somewhat. confident of having enough money for Table 21, Employee Characteristics of Sponsors and $20 per week more than they are currently saving for reasons listed is the most important reason their com- Saving for Retirement—Almost 8 in 10 Asian-American • They just haven’t done it yet (6 percent). One-third plan on funding their retirement with the has an impact on employee attitude and performance education or higher levels of household income also 775-9132; fax number, (202) 775-6312; e-mail: Publications Subscriptions@ebri.org. other things (table 2). it to last 30 years or more (18 percent). However, 15 per- their primary strategy, and 11 percent use some other Membership Information: Inquir- th tailored to the unique needs of their business (23 per- able retirement (compared with 85 percent and 57 per- retirement plan). in retirement, how much they expect to receive from and 238 retirees) age 25 and older in the United States. These findings are part of the 11 $20,000–$40,000 annual Retirement 63 62 prospects. Despite the downward trend in retirement 61 63 65 -$ 56 6 percent). National Council of La Raza Significant findings from the fourth annual SERS the EBRI Education and Research Fund; and Mathew and among workers overall expect that employment More than half of small employers that offer a efforts focused on small employers should not only the 2001 RCS, the 2001 Minority RCS, and the 2001 the African-American population varies widely. African- retirement in order to live comfortably has dropped respondents in 19 percent). components of a retirement needs calculation through to 100 full-time workers). It provides insights into the over at the end of the month (12 percent). With respect to ship of more than 250 private- and public-sector nies might offer a retirement plan to their workers and credits for starting a plan. However, respondents to this year’s SERS are less likely Since its inception, EBRI’s membership has workers report that they or their spouse have personally be saving for retirement and to have calculated how source. Almost two-thirds think they will receive income Benefit ies regarding EBRI membership, and/or contributions to EBRI-ERF should be directed to EBRI President Dallas of preparing financially for retirement; this year, 70 per- more likely to report that they have personally saved for Nonsponsors, by Size of Business ............................ 23 phased increase in the Social Security normal retirement retirement (61 percent). Of these, 24 percent indicate workers report that they or their spouse have personally • cent of those with household incomes of less than The plan offered isn’t a good plan (6 percent). basic expenses in retirement (62 percent), almost half cent expect that their retirement will last for 10 years or pany does not offer a retirement plan, these are proceeds from the sale of a home or business (33 per- On the other hand, workers who are very or (compared with 33 percent of nonsponsors). While some Tables and Char report having accumulated more for retirement. If you want to retire in: ts 10 years Your factor is: Like other key indicators, the percentage of respondents strategy. 1.3 cent), easy-to-understand information available (19 per- cent in 2000). Social Security, and how much they expect to receive Over $40,000 21 7 Under 22 writers 7 20 4 Confidence Survey (RCS), a survey that gauges the views Random digit dialing was used to obtain a representative will provide a source of income in retirement. About No Another obstacle to plan sponsorship may be w it’s easier than ever to find exactly what y confidence, those who report they or their spouse have ou’re looking for with our retirement plan have provided this type of benefit to Nationwide Financial include: Greenwald & Associates, Inc., a Washington, DC-based inform them of their plan options, but also focus on the SERS. American college graduates are as likely as college from 51 percent in 2000 to 46 percent in 2001. When three minority The Social Security Administration says Social savings vehicles, most savers report having used regular institutions dedicated to raising public awareness of asked to choose which of these is the most important questions about how much of their preretirement income challenge presented by the small employer market by Salisbury at the above address, (202) 659-0670; e-mail: salisbury@ebri.org Comparative Pr 2001 MRCS ofiles Research than in previous years to say the competitive advantage • Contrary to the downward trend in retirement confidence, worker confidence in Social saved for retirement (50 percent), while 7 in 10 of all from an employer through a defined benefit plan (64 per- Table 22, Likelihood of Starting a Plan in the Next retirement (86 percent vs. 55 percent), they are currently much money they will need to have saved by the time $50,000 think they will receive a percentage in this age from 65 to 67 (table 8). More than half expect to are confident that they are doing a good job preparing Educational Level 15 years cent are confident (table 1). Likewise, confidence in they would not need to sacrifice anything in order to save important secondary reasons for some respondents. saved for retirement (78 percent), compared with 69 per- 1.6 • They are too old (5 percent). somewhat confident about Social Security and Medicare less, and another 11 percent believe their retirement will cent). nonsponsors may not be aware of the potential business Workers reporting that they or their spouse have grown to represent a cr saying they have personally saved for retirement has cent), and a plan with reduced administrative require- oss section of pension funds; Half of workers report that an employer contrib- from a pension or defined benefit plan, the percentage of Workers are less likely in 2001 than in 2000 to cross section of the U.S. population. Starting with the nonsponsors’ lack of familiarity with the different and attitudes of working-age and retired Americans 6 in 10 each expect to receive retirement income from tried to do a retirement needs calculation are more likely graduates overall and African-Americans with household OppenheimerFunds their workers for less than 10 years (52 percent)—one- • Security should replace about 40 percent of they will need in retirement, how much they expect to market research firm. demonstrating the underlying reasons for the lack of There are a number of reasons why small employers potential business benefits that can result from plan savings or investments set aside for retirement and what is needed to ensure long-term personal financial reason why their business offers a plan, one-fourth of all respondents were made aware of the components of a groups (African- Table 1, Worker Confidence in Financial Aspects Institute- e High school or less xtensive search engine and sit 20 years40 e map. Jus 60Chart 2 41t type in the ke 1.8 58 y w 36ords 75 Security and Medicare has continued to increase steadily from the lows measured in workers in the United States report having saved they retire. In fact, 6 in 10 now say they are behind cent). Half—a higher proportion than for workers overall for the business in employee recruitment and retention having enough money for basic expenses in retirement saving for retirement (82 percent vs. 50 percent), and Retirement Plan Sponsorship range). Thirty-two percent (27 percent of those with reach full eligibility sooner than they actually will financially for their retirement (48 percent) and that this amount. Two Years Three in 10 (30 percent) say that vesting requirements cent of workers overall. The higher likelihood of having .................................................................. 23 • They don’t understand how the plan works (4 per- Although 2 in 10 Hispanic-American workers benefits of offering a retirement plan, the company and decreased slightly in the past year, from 75 percent in last 11–19 years. Twenty percent are unable to say how uted money to a retirement account in their name or ments (18 percent). One in 10 say that none of these say they are on track and more likely to say they are workers saying they have tried to calculate how much Small employers that sponsor retirement plans tend to 2001 wave of the RCS, all data are weighted by age, sex Some college 39 27 41 28 34 16 regarding retirement, their preparations for retirement, 25 years than those who have not to feel confident about having 2.1 retirement plan types available to them as potential plan Principal Financial Group do not offer a retirement plan. Some are employee- an employer through a defined benefit plan. Members The 2001 SERS data collection was funded by Worker Confidence businesses; trade associations; labor unions; health car That Social Security W sponsorship. incomes of $50,000 or more are even less likely than all retirement needs calculation, the number decreased ill Continue to Provide Americans, e This year’s preretirement earnings of average earners; 80 percent Education receive from Social Security, and how much they expect plan sponsorship. In addition to the issues of administra- work-related retirement savings plans (table 11). They independence, a part of the EBRI Education and Re- of Retirement ............................................................... 5 is a major reason why they offer a retirement plan 1995, although the majority of workers continue to remain not confident. Aetna Financial Services (69 percent). As with previous findings, the difference in schedule when it comes to planning and saving for and for any other minority group—plan on funding their Editorial Board: Dallas L. Salisbury, publisher; Steve Blakely, managing editor; Cindy O Table 23, Motivators for Plan Sponsorship has decreased to 78 percent from 84 percent in 2000. they automatically save a predetermined amount ’Connor, production and distribution. Any .................. 24 (55 percent). Many of these incorrectly expect to be saved for retirement is primarily concentrated among cent). they will have enough money to take care of medical and let us do the work f long they expect to be retired. (causing too much money to go to short-term employees) who expect to retire think that less than 20 percent of or you. work force differences noted above make it likely that 2000 to 71 percent in 2001 (chart 5). When respondents their spouse’s name last year (49 percent), and two- College degree or more 18 11 factors would make them more likely to offer a retire- 15 11 25 9 behind schedule when it comes to their progress in money they need to save for a comfortable retirement 30 years 2.4 Benefits of Equal differ from those without plans in terms of business Value sponsors, including the options created specifically for their confidence with regard to various aspects of retire- and education to reflect the actual proportions in the of all three minority groups are more likely than enough money for retirement (table 4). and Research Prudential Retirement Services grants from nine public and private organizations, with related, while others relate to the nature of the Hispanic-Americans, and Asian-Americans) were of those with incomes in this range to say they are Most often, the retirement plan offered by small employ- further to 39 percent. Retirement not at for the lowest earners; and 27 percent for those at the views expressed in this publication and those of the authors should not be ascribed to the officers, trustees, members, or othe are less likely to say they have used an individual search Fund; and Mathew Greenwald & Associates, Inc.,r Table 2, Reasons Why Workers Are Not Confident to receive from a pension or defined benefit plan, the tive cost and burden involved in establishing and Table 6 American Society of Pension Actuaries (47 percent, down from a high of 65 percent in 2000). the proportions saving for retirement is driven by certain retirement with the proceeds from the sale of a home or Chart 1, Worker Confidence in Having Enough (77 percent vs. 53 percent). retirement (60 percent, up from 54 percent in 2000). eligible for full retirement benefits at age 65 (34 percent expenses (48 percent), and approximately one-third are Length of Time With Company providers and insur Finally, workers are less likely to be confident about ers; go is a major reason why they do not offer a plan. Roughly those ages 25–44. Asian-American workers and workers vernment organizations; and 35 years their preretirement income will be replaced by money Two in 10 workers expect that they will need 2.8 Asian-Americans others might not experience these same benefits. ment plan to their workers (8 percent). thirds of employed respondents indicate that their decreases further adult population. In this year’s report, data for previous sponsors of the Employee Benefit Research Institute, the EBRI Education and Research Fund, or their staffs. Nothing herein is Table 18characteristics and the composition of their work force. to small employers and designed to be less costly to estab- ment, and related issues. The survey was conducted in Fund. workers overall to expect that monetary support from 100% Neverthe- all ers is a defined contribution plan (funded primarily by confident. Scudder Kemper Investments maximum taxable wage base of $80,400 (about 11 per- percentage of workers saying they have tried to calculate staff time donated by EBRI, ASEC, and Greenwald. running a plan, difficulties involve the financial realities business, plan costs, and administration. Amount Accumulated for Retirement, Less than 3 years 14 28 surveyed as part of the Retirement Confidence Survey retirement account (IRA). Almost 4 in 10 state they have a Washington, DC-based market research firm. • One-half of workers who have attempted to calculate 14 26 15 Confidence 47 About Social Security and Medicare 4% .......................... 3% 3% 6 Nationwide Financial • Hispanic-Americans tend to be the least confident among the surveyed minority groups 7% segments of the Hispanic-American population, prima- business (50 percent). 40 years having enough for medical expenses (58 percent, down Those who receive these types of educational 3.3 of all workers), but some believe they will be eligible confident they will have enough money to pay for long- 4% 7% Money to Live Comfortably Throughout 2 in 10 feel there are too many government regulations overall who are age 45 and older are equally likely to say 8% Workers who contribute money to a retirement 5% from Social Security (19 percent), 4 in 10 expect that 7% be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, or interpretative rule, or as Table 2 less than 50 percent of their preretirement income in current employer offers them a retirement savings plan legal, Reasons for Offering a Retirement Plan, by Size of Business to 39 percent. service firms, including actuarial firms, emplo These findings bolster the conclusion that low coverage yee waves of the RCS have also been weighted to allow for All rightsby Trying to Do a Retirement Needs 3–9 years 51 48 48 50 56 35 January and February of 2001 through 20-minute phone Chart 4 less, the decrease lish and administer. A majority of nonsponsors have • Society for Human Resource Management SERS materials and a list of underwriters may be Most small employers without plans are largely their children or other family members will be at least (RCS). Results of the survey show similarities as well as contributions from the workers), rather than a defined their retirement savings needs report that they have Survey (RCS) cent of workers make more than this amount). how much money they need to save for a comfortable of running a small business—revenue streams that are And, you can order many of our publications online — wit kept retirement savings in the form of cash in a safe 2001 RCS The 2001 RCS data collection was funded by h delivery within Table 3, Reasons Why Workers Are Confident About that they will have enough money to live comfortably throughout their retirement 16% OppenheimerFunds Retirement Confidence—Approximately 7 in 10 Asian- rily the older, less educated, lower income, and Two in 10 Asian-American workers who expect accounting, actuarial, or other such professional advice. 18% Table 5from 66 percent in 2000) and for long-term care (44 per- materials and opportunities most frequently report Retirement ................................................................... 4 even before age 65 (21 percent of all workers). Two in 10 Reasons Why Workers Are Not Confident About Social Security and Medicare 17% they have saved. In addition, native-born Asian-Ameri- savings plan at work tend to be more confident about term care (35 percent). Obstacles to Plan Sponsorship order to live comfortably in retirement (19 percent), and (22 percent) or that the tax benefits for the owner are too Social Security will replace 20 percent to 49 percent of Retirement Confidence 10 years or more 31 19 that allows them to make before-tax contributions, such 34 19 26 =$ 19 Total additional savings needed at retirement: Total additional savings needed at retirement: Total additional savings needed at retirement: Total additional savings needed at retirement: Total additional savings needed at retirement: (Forty-four Calculation: 2001 19% 17% 16% Potential Motivators reserved. Percentage of Workers Having SERS Methodology rates are driven by more than just issues of administra- Tried to Calcula 21% te How Much never heard of SEPs (52 percent) and an additional interviews with 1,000 individuals (762 workers and consistent comparisons; consequently, some data in the a minor source of income in retirement. in retirement TIAA-CREF accessed at the EBRI Web site: www.ebri.org/sers unfamiliar with plans that have been created specifi- differences among individuals in these minority groups. Planning for Retirement benefit plan (funded exclusively by the employer). made changes in their retirement planning, such as 21% —The typical African-American represents the One-third of African-American workers report place at home or safe deposit box (37 percent). grants from 26 public and private organizations, and the retirement decreased even further. uncertain or a business that is too new to consider a Social Security and Medicare 80% ..................................... benefit consulting firms, law firms, accounting firms, 7 Principal Financial Group Progress in Planning and Saving for Retirement, by Trying to years. American workers are confident that they will have Most Important Reason Major Reason Very foreign-born segments. There is no statistical difference to retire think that at least 50 percent of their Chart 2, Worker Confidence That Social Security Will receiving them in the form of employee benefit state- 26% workers say they do not know when they will be eligible Confidence about the financial aspects of retire- 48 hours! It’s as easy as clic cent, down from 51 percent). small (16 percent). Only about 1 in 10 say the possibility cans surveyed by the RCS are no more likely than king a button! having enough money for a comfortable retirement one-fourth expect they will need between 50 percent and their preretirement income (40 percent), and one-third Money They Will Need to Save for as a 401(k), 403(b), or 457 plan (66 percent). Of those Their Retirement percent say they EBRI Issue Brief is registered in the U.S. Patent and Trademark Office. ISSN: 0887-137X 0887-137X/90 $ .50+.50 2001 RCS may differ slightly with data published in tive cost and burden. 16 percent have heard of them but are not too familiar 238 retirees) age 25 and older in the United States. • Although findings for minority groups as a whole and Confident confidence has worker expects to retire around age 64, although 28 per- Among those survey respondents from businesses with a T. Rowe Price Associates that they or their spouse have tried to figure out how plan. Difficulties also involve work force issues, such as cally for them (i.e., SIMPLE and SEP plans). There are a number of reasons why more small employ- Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 In addition, the RCS reports that today’s work- Do a Retirement Needs Calculation Among the key findings are: minority data collection was funded by grants from saving more and/or changing the allocation of their Thirty-two percent report that an employer Small Employer Retirement Survey. 11th annual After a number of years of steady increases in retirement Table 4, Confidence in Financial Aspects of Prudential Retirement Services Don’t panic. Don’t panic. Don’t panic. Don’t panic. Don’t panic. Most Frequently Mentioned Reasons All Those same accountants devised another formula to show you how much to Done Needs Not Done Needs enough money to live comfortably throughout their Social Security Medicare between the percentage of native-born Hispanic-Ameri- preretirement income will be replaced by money from ments (89 percent) and brochures (85 percent). More Certain demographic groups are more likely The potential exists for increased plan sponsorship to receive full benefits from Social Security (20 percent). ment is lower among Hispanic-American workers than Continue to Provide Benefits of Equal Value of being held liable for investment decisions made by workers overall to report saving. ............ 5 (80 percent) than are those who either are not offered or The annual Small Employer Retirement Survey (SERS), expect it will replace 50 percent or more (34 percent). In and investment management firms. 59 percent (24 percent) (table 9). Only 16 percent antici- offered such a plan, three-fourths say they contribute 5–20 21–100 5–20 21–100 or their spouse 4 previous waves of the RCS. Small employers that offer retirement plans tend Random digit dialing was used to obtain a representative 60% Somewh generally been at with them. One-third have never heard of SIMPLE plans • Vanguard Group There tend to be major differences between the types for workers overall reveal differences in retirement save each year in order to reach your goal amount. They factor in compounding. That’s Workers Calculation Significant Calculation • wave of this study. Although there have been numerous Overall, Asian-American workers cent anticipate retiring at age 65, 14 percent expect to plan who are able to identify their plan as either a money. Workers who have done the calculation also tend to report the much money they will need to have saved by the time ers feel less confident in regard to having enough money employee preferences for cash or nonretirement benefits, ers do not offer retirement plans (table 19). Cost and contributed money to a retirement savings account in 11 organizations. Staffing was donated by EBRI, ASEC, Retirement by Calculation of Retirement Savings confidence, this year’s survey finds that workers’ confi- Key 2001 SERS findings include: retirement years—33 percent are Scudder Kemper Investments very confident and can workers and all workers who have saved. In Social Security (21 percent), more than one-third expect Chart 3, Worker Confidence That Medicare Will than others to have experienced a decline in retirement than half say they receive newsletters or magazines, 31% Only 15 percent are able to give the correct age at which 60% 42% Almost two-thirds of Asian-Americans are among small employers. Thirty-eight percent of respon- do not contribute to a work-related plan (53 percent). among workers in the United States overall. However, now in its fourth year, was designed to gauge the views pate needing 70 percent to 79 percent of their pre- employees (12 percent) or not knowing where to go for addition, one-third think they will receive money from Total Employees 51%Employees Total Empoyees Employees 38% 40% All money to the plan (76 percent). Those who contribute to Done Needs Not Done Needs 36% Confident have tried to It is going bankrupt, with too many retirees and not enough workers paying into the system 25% 12% where your money not only makes interest, your interest starts making interest as well, to have higher revenues than those that do not have (34 percent) and more than 1 in 10 are not too familiar cross section of the U.S. population. Data for the 2001 EBRI Member confidence, expectations, and planning and saving In theory, each sample of 1,000 yields a statisti- s — check out the special password-pr Today, EBRI is recognizo ed as one of the most tected area where y steeper among ou Watson Wyatt of small businesses that sponsor a retirement plan 41% findings from highest levels of confidence about various financial changes to the questionnaire during these 11 years, retire at age 66 or later, and 4 percent think they will defined contribution or defined benefit plan when appear to be in better shape regarding their retire- 46% they retire so that they can live comfortably in retire- their name or in their spouse’s name last year (compared and Greenwald and Associates. RCS materials and a list 45% 39% to live comfortably in retirement. These and other and high proportions of seasonal, part time, or high administration-related issues play a role, but so do Needs: 2001 ................................................................. 8 T. Rowe Price Associates dence in having enough money to live comfortably • While cost and administration-related issues play a role in why small employers do not 39 percent are 37% somewhat confident (table 14). Eight in 10 addition, the results for Hispanics and non-Hispanics that Social Security will replace 20 percent to 49 percent Workers individual access to a financial planner, workbooks or Continue to Provide Benefits of Equal Value Calculation Calculation ............ 6 they will be eligible for full retirement benefits, and confidence among the different demographic segments of confidence. In general, confidence in the financial aspects information on starting a plan are major reasons (9 per- currently saving for retirement (64 percent). Six in 10 dents from companies without a retirement plan say Nothing Almost half of workers who are not currently Not sure it will be there, don’t have faith 19% 6% 28% and attitudes of America’s small employers (with five– retirement income to live comfortably, and one-fourth other government programs (34 percent, compared with Did you read this as a pass-along? Stay ahead of employee benefit 15 14 42% 33% Not Too creating a snowball effect. the plan tend to offer the following explanations for how figure this Could we send a friend or colleague a complimentary th cal precision of plus or minus 3 percentage points (with retirement plans (table 20). They are more likely to be a 39% with them (13 percent) (SIMPLE plans were created by wave of the RCS are weighted by age, sex, and education behavior, the attitudes and behavior of some segments Competitive advantage for the business in employee recruitment and retention 25% 22% 31% 47% 44% 53% never retire. (The current normal Social Security retire- provided with a simplified definition, 9 in 10 report their ment (32 percent). This makes them less likely than findings in the RCS support the point that expanding turnover workers. and those that do not. For instance, those that do the 11 annual with 49 percent of all workers). In general, African- of underwriters may be accessed at the EBRI Web site: aspects of retirement. African- and Hispanic-Ameri- certain key questions have tracked trends in retirement ment finances and preparations. throughout their retirement years has fallen (chart 1). Table 5, Progress in Planning and Saving for employee demand and business profitability. In fact, Less than $5,000 The government does a poor job 8 8 9 Vanguard Group 10 15 have access to hundreds of EBRI publications and research online! offer retirement plans, they are not the main reasons. Employee-related reasons are are very or somewhat confident of having enough money Confident ages 35–44 or with a college degree are similar. of their preretirement income (35 percent), and another 40% authoritative and objectiv of retirement is more likely to have fallen among work- worksheets, and seminars. Notably, the use of Intranet, issues with your own subscription to e resources in the world on EBRI Issue Briefs for only $49/ they are likely to start offering a plan in the next two 7 percent believe they will be eligible later than they the Hispanic-American population varies widely, and Chart 4, Percentage of Workers Having Tried to cent). savers say they automatically save a predetermined saving for retirement say that it is reasonably possible 100 full-time workers) regarding retirement plans and 23 percent for native-born Hispanic-Americans and 34% anticipate needing 80 percent or more (24 percent). This they decided on the amount of money to contribute: Positive effect on employee attitude and performance copy of 40% EBRI Issue Brief? 33% 19 20 16 61 58 66 32% 32% amount.) 2000 2001 2000 2001 2000 2001 95 percent certainty) of what the results would be if all Table 22 family-owned business and to have been in business for to reflect the actual proportions in the adult population $5,000–$9,999 The government borrows from program and puts money toward other things 6 4 7 9 1 Congress specifically for small employers). Many sponsor a plan tend to have been in business longer of each minority population mirror the attitudes and RCS: confidence and retirement planning behavior for much of ment age is 65, and is gradually being raised to 67.) company offers a defined contribution plan (90 percent). workers overall (44 percent) to report doing a retirement financial literacy must be a national goal if Americans responses suggest that administrative cost and burden Conclusion Small employers that do sponsor a retirement 29% Americans appear less likely than workers overall at www.ebri.org/rcs • can workers tend to report lower levels of confidence. year electronically e-mailed to you or $99/year printed and mailed. Hispanic-Americans tend to be the least confident Retirement, by Trying to Do a Retirement 6. To determine the ANNUAL amount you’ll need to save, multiply the TOTAL amount by the factor below. While 72 percent of workers surveyed as part of the 2000 most often cited as the most important factor for not offering a retirement plan. for basic expenses in retirement (81 percent), while Not At All third think it will replace less than 20 percent (32 per- Forty-four percent of Hispanic-Americans are ers between the ages of 35 and 54 than among older or Internet, and online services increased from 4 percent in Calculate How Much Money They Will Need to actually will be. Employers have an obligation to provide a retirement plan for employees amount each pay period or each month (61 percent), but 16 16 17 35 32 41 for them to save $20 per week for retirement (47 per- years (table 22). some segments are just as likely as their non-Hispanic related issues. This wave of the survey was conducted means that workers expect to live more frugally than 25 percent for all workers). Finally, Hispanic-Americans, Reasons cited for nonsponsorship by larger and • It is the maximum they can afford (31 percent). Baby boomers and Generation Xers won’t receive full benefits 8 3 3 =$ $10,000 Workers –$24,999 10 10 employ 10ee benefit issues—health care, pensions, and Likelihood of Starting a Plan in the Next Two Years less than 10 years. These differences persist even when This and subsequent nonsponsors are also not familiar with more traditional age 25 and older. Americans age 25 and older were surveyed with com- behavior of similar segments of the overall worker For more information about subscriptions, visit our Web site at Confident and have older, more educated, and longer-tenured • The percent- • Thirty-two percent of African-Americans, 32 percent this time. The picture portrayed by these trends for the Three in 10 are unable to estimate how long they will The remainder say their company offers a defined benefit among the surveyed minority groups that they will savings needs calculation. However, African-American If you want to retire in: 10 years Your factor is: similar income levels to report this type of employer .085 are to achieve economic security in their retirement plan report they offer a plan for business reasons—it has may not be the main reason why the majority of these Needs Calculation Tax advantage for employees ....................................................... 8 9 7 12 34 34 34 RCS were confident of having enough money, just 63 per- A lot ahead of schedule Business-related reasons, such as profitability or a business that is too new, are also 3% 2% roughly 7 in 10 are confident that they are doing a good 4% 4% 2% 1% currently saving for retirement (compared with 55 per- cent). Eleven percent do not know how much of their Send an issue to 1998 to 47 percent in 2001. This increase may help to Save for Their Retirement .......................................... 7 counterparts to express confidence in their retirement $25,000 Nearly half of today’s workers expect to retire at –$49,999 The media reports that it won’t be there 7 8 8 younger workers and among those with annual house- smaller employers differ. Small employers with five–20 others report less systematic methods. Fourteen percent 7 5 cent). In addition, two-thirds of workers who are already Those likely to start a plan are more likely than within the United States in January and February of 44% current retirees are now living. More than half of retir- like other minority groups, tend to be more likely than references to 2001 • It is the maximum amount that is matched by their with higher 20% 39% 39% www.ebri.org or complete the form below and return it to EBRI. plete accuracy. There are other possible sources of error So the owner can save for retirement on a tax-deferred basis EBRI P20% eriodicals subscriber 15 years 38% s also ha 38% vesponsors and nonsponsors of similar sizes are compared. a passw 7 ord t 9 .052 hat allo 5 34ws them to 37 27 pension or deferred profit-sharing plans. By comparison, population. Minority RCS findings are restricted to workers A little ahead of schedule 4 3 spend in retirement (30 percent), but the median expec- plan (5 percent) or both types of plans (5 percent). 5 4 2 3 workers surveyed in the 2001 RCS with household years. workers; those that do not tend to be newer busi- 33% economic security age of .contribution. African-American workers and workers of Hispanic-Americans, and 48 percent of Asian- past few years has been optimistic, with slight upswings have enough money to live comfortably throughout 33% 33% The issue of low cent report being confident in 2001. At the same time, Table 6, Amount Accumulated for Retirement, by small employers chose not to offer a retirement plan. $50,000–$99,999 Abuse/mishandling 8 10 7 4 6 respondents doing a cited as major decision-drivers.job preparing financially for their retirement (73 per- 32% cent of native-born Hispanic-Americans and 61 percent preretirement income will be replaced by Social Security. hold income of $35,000 to $74,999 than among those with explain the reported decrease in the incidence of em- those that are not to report that the most important age 65 or later (46 percent, up from 41 percent in 1991). prospects. Among these are Hispanic-Americans ages Very likely Chart 5, Percentage of Workers Saving for save when they feel they can afford to, and 13 percent 13% saving report that it is possible for them to save an extra Organization 2001 through 15-minute telephone interviews with 302 all workers to expect monetary support from children or ees have a retirement income that is at least 80 percent employer (17 percent). Tax advantage for key executives 6 7 4 25 26 21 On track 20 years 38 33 49 45 .03625 23 household incomes in all surveys, however, that may be more serious than $100,000 or more Negative about the president or Republican party 15 25 8 Furthermore, sponsors are more likely than 3 6 retirement needs and include additional oversamples of minority groups, very few nonsponsors say they have never heard of or are nesses that have higher turnover and younger, less in retirement confidence backed by significant changes tation for those who are able to provide an estimate is Although very few employers with five–20 workers offer incomes of less than $25,000, with incomes of $25,000– respondents who said they have personally saved for The SERS makes clear the need for information Two in 10 say employee preferences for wages access all online EBRI Issue Briefs overall are equally likely to say they are offered a Americans report they or their spouse have tried to their retirement years. and/or Notes! plan sponsor- 5Trying to Do a Retirement Needs Calculation: 2001 Somewhat likely 9 25 the percentage of workers who are not at all confident of cent). Six in 10 are confident that they will have enough of all workers). More than half of savers report automati- Two in 10 anticipate receiving money from other govern- See U.S. Department of Labor, Bureau of Labor Statistics, Employees demand or expect it Employee higher or lower incomes. ployer-provided educational materials. Educational Name Retirement 4 3................................................................... 5 24 19 35 9 Those who have not saved for retirement are especially save whatever is left over at the end of the month. With reason they do not currently have a plan is because $20 per week (65 percent). Among those who say they 35–44 and those with a college degree. Both segments A little behind schedule 25 years 25 26 companies with a retirement plan and 299 companies of their preretirement income (56 percent), and another 25 7other family members (29 percent vs. 19 percent). 25 .02725 26 • It is the maximum amount allowed by the plan calculation refer to the Address Don’t know/ refusedBenefits will be smaller or cut 27 30 24 2 9 or more formal ASEC/EBRI-ERF Plans exist in which employers as plan sponsors are not legally required to nonsponsors to be in the professional services industry not too familiar with 401(k) plans. specifically African-Americans, Hispanic-Americans, and theoretical calculations of sampling error. These include Not too likely 28 Benefits in Medium and Large Private Establishments, 1997 educated employees. retirement decreased slightly after an upswing in the , Bulletin 2517 in retirement planning and saving activities. In contrast, 20 years in retirement. both types of plans (1 percent), about 1 in 10 with 21–100 The changes in individual behavior regarding $49,999, and with incomes of $50,000 or more are as Availability of an employer tax deduction 0% retirement savings plan by their current employer 4 5 2 22 22 ship rates 20 Table 7, Educational Materials and Opportunities by highlighting the lack of knowledge among many small African-Americans and/or other benefits are the most important reason A lot behind schedule 0% 29 34 17 21 44 45 having enough money for retirement nearly doubled • Many retirement plan nonsponsors are unaware or unfamiliar with the plan options 30 years money to take care of medical expenses (61 percent), and .020 revised methodology as cally saving a predetermined amount each pay period or ment programs (21 percent). Finally, Asian-Americans, Suite 600 Costs are rising Chart 6, Familiarity of Retirement Plan Options materials delivered through Internet or online services 0 8 likely to plan to retire at age 65 or later or to never retire are just as likely as workers overall ages 35–44 or with a make contributions. For example, employer contributions are not required respect to savings vehicles, most savers report having revenue is too uncertain to commit to a plan (25 percent could save this $20 per week, 15 percent say they would without a retirement plan. Oversamples of companies Organization 8 percent have a retirement income that is 70 percent to The Social Security Administration says Social Not at all likely (11 percent). 34 education are (Washington, DC: U.S. Government Printing Office, 1999). City/State/ZIP 1993 1994 1995 1996 1997 1998 1999 2000 2001 ASEC refusals to be interviewed and other forms of Other 1993 1994 1995 1996 1997 (25 percent vs. 16 percent) and less likely to be in the 1998 2 1999 2 2000 2001 4 20015 5 5 Asian-Americans (200 interviews were conducted within Nevertheless, nonsponsors are apparently 2121 K Street NW 4 described in the 35 years workers offer both types (12 percent). When it comes to funding their retirement, a .016 • likely as their counterparts among the overall worker employers that do not sponsor a retirement plan. Many Small employers of all sizes that sponsor plans report past several years, from 75 percent in 2000 to 71 per- Source: Employee Benefit Research Institute, American Savings (48 percent vs. 49 percent). Of those who are offered a retirement savings may in part be attributed to recent the 2001 RCS finds that retirement confidence has with a 401(k) plan—the sponsor could choose not to match participant among smaller (10 percent in 2000, 17 percent in 2001). their company does not sponsor a plan (19 percent). Provided by Employer and Their Effectiveness, In the RCS, worker refers to all individuals under age 65 who are not and incentives available to them as potential plans sponsors. Some small employers more than half are confident they will have enough each month (58 percent), but almost 2 in 10 say they like other minority groups, tend to be more likely than are less visible than materials delivered in more tradi- vs. 13 percent) or that their business is too new (12 per- (49 percent of savers vs. 59 percent of nonsavers). In college degree to say they are confident. Moreover, the Among Small Employers Without Retirement used regular savings or investments set aside for retire- not have to give up anything to do so. Those who would with 21–50 and 51–100 employees were obtained to allow 2001 SERS Security should replace about 40 percent of preretire- Washington, DC 79 percent of their preretirement income. Just one-fourth • The percentage match declines after this point 1 Address beginning of the 6 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Retirement Confidence more likely than —More than half of African- 40 years In the RCS, retiree refers to individuals who are retired or who are age 65 or contributions and to pass the administrative costs on to the plan. However, if .013 nonresponse, the effects of question wording and ques- See U.S. Department of Labor, Bureau of Labor Statistics, Education Council, and Mathew Greenwald & Associates, Inc., 2001 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Employee retired, regardless of employment status. Workers also include individuals age retail trade industry (14 percent vs. 22 percent). each of the three groups). Among Hispanic-Americans, Your Name becoming more familiar with SIMPLE plans. In 1998, direct business benefits as important reasons why Source: Employee Benefit Research Institute, American Savings Education Council, and declined and that fewer nonretired individuals are majority of African-Americans expect that they or their Small employers that offer a defined contribu- population to say they have done this calculation. small employers without plans are largely ignorant of Fifteen percent cite another employee-related reason for cent in 2001. When respondents were asked more Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald plan, 68 percent say they contribute money to it. declines in consumer confidence, employment, the employers Among Those Reporting Their Employer Provides 20037-1896 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 Retirement Given recent economic uncertainty, this decline may be making a premature decision not to sponsor a plan based on incomplete money to pay for long-term care (53 percent). save when they feel they can afford to (18 percent) or all workers to expect monetary support from children or Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2001 Visit EBRI online todational ways because they have no physical presence. As yPlans : www .......................................................................... .ebri.org Small Employer Retirement Survey. “Preparing for 22 AMERICAN contrast to these expectations, however, most retirees ment and work-related retirement savings plans. More have to sacrifice are most likely to say they would cut cent vs. 2 percent). It therefore appears that they feel 2001 RCS finds that native-born Hispanic-Americans are Associates, Inc., 2001 Retirement Confidence Survey. separate analysis of these groups. Within each sample, older and not employed full time. Worker refers to all individuals who are not report their current income is less than 60 percent of the 401(k) is established as a SIMPLE plan, then company contributions are ment earnings of average earners; 80 percent for the Benefits in Small Private Establishments, 1996 Retirement Confidence Survey. Associates, Inc., 2001 Retirement Confidence Survey. , Bulletin 2507 (Washington, 65 and older who are employed full time and have not retired from a previous (9 percent). those with lower & Associates, Inc., 2001 Retirement Confidence Survey. American workers are confident that they will have Confidence Survey. Mathew Greenwald & Associates, Inc., 2001 Small Employer Retirement Survey. City/State/ZIP Sponsors and nonsponsors also tend to employ 47 percent of nonsponsors said they had never heard of interviews were conducted in English or Spanish, tion order, and screening. While attempts are made to they sponsor a plan, such as the competitive advan- detailed questions about their retirement planning See? See? See? See? See? It’s not impossible or even particularly painful. It just takes planning. And the sooner you start, the better off you’ll b economy, and the equity markets. In addition, the data engaging in retirement planning and savings activities spouse will work—20 percent say employment will be a tion plan are most likely to provide a 401(k) for their Retirement” section. e. Four in 10 of those who have done a retirement When asked to assess their progress with respect remains a the options that have been created in law specifically for not sponsoring a plan—a large portion of their workers Educational Materials or Opportunities 202-775-9130 or .................. 10 defined as retirees, regardless of employment status. required. in confidence is not unexpected. Despite increases in DC: U.S. Government Printing Office, 1999). information. career. Asian-American workers are more likely than save whatever is left over at the end of the month other family members (32 percent vs. 19 percent). retirement plan providers shift their educational materi- report actual retirement ages younger than age 65. as likely as all workers in the United States to say they Employee Benefit R than half say they have used an IRA (table 15). esearch Institute S continued improvement in their business conditions will back on entertainment or dining out. AVINGS 2001 data are weighted by size of business to reflect the their preretirement income (25 percent). lowest earners; and 27 percent for those at the maximum 202-659-0670 Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 This worksheet simplifies several retirement planning issues such as projected Social Security benefits and earnings assumptions on savings. 2121 K Street, NW Suite 600 Washington, DC 20037 Fax 202-775-6360 EDUCATION Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 or Fax to: (202) 775-6312 It also reflects today’s dollars; therefore you will need to re-calculate your retirement needs annually and as your salary and circumstances www.asec.org phone (202) 659-0670 Fax (202) 775-6312 change. You may want to consider doing further analysis, either by yourself using or Fax to: (202) 775-6312 a more detailed worksheet or computer software or with ® www.ebri.org COUNCIL EBRI Issue Brief Number 234 • June 2001 • © 2001. EBRI the assistance of a financial professional. ©Copyright, American Savings Education Council of the EBRI-ERF. All rights reserved. 26 30 22 8 28 20 24 12 6 10 16 4 14 18 2 32 www.ebri.org June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief 5/00 June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief June 2001 • EBRI Issue Brief 15 29 25 13 31 21 27 19 23 17 11 3 9 5 7 1 Issue Brief Percentage of Workers Issue Brief Percentage of Workers The premier organization

Volume 234

Pages 32

EBRI Issue Brief

Dallas Salisbury

Teresa Turyn

Ruth Helman

Retirement