Jan. November 1997 Feb. EBRI Publications EBRI Issue Brief (ISSN 0887-137X) is published monthly at $300 per year or is included as part of a membership Chart 7, Workers’ Confidence in Their Overall EBRI subscription by the Employee Benefit Research Institute, 2121 K Street, NW, Suite 600, Washington, DC 20037-1896. Mar. Chart 11 Chart 18 Chart 6 Chart 14 Chart 8 Chart 10 Chart 4 Chart 16 Chart 2 Chart 9 Chart 1 Chart 17 Table 1 Chart 13 Retirement Income Prospects ..................................... 9 Periodicals postage rate paid in Washington, DC. POSTMASTER: Send address changes to: EBRI Issue Brief, 2121 K Chart 3a Chart 3b Increased Saving but Little Worker Usage of 401(k) and Similar Plans Segmenting the American Population EMPLOYEE Overall Confidence versus Personal Preparation Confidence Americans’ Confidence in Social Security and Medicare Workers With a Retirement Savings Goal Retiree Confidence Levels Workers: I’m Okay, You’re Not Table of Expected Retirement Income Sources Among Current Workers False Confidence? Retirement Expectations Among Current Workers If Forced to Choose, Americans’ Preference for Social Security Reform Workers’ Confidence in Having Enough Money for a Comfortable Retirement Do Workers Believe Medicare Will Be There When They Retire? Perceived Clarity of Individual Retirement Street, NW, Suite 600, Washington, DC 20037-1896. Copyright 1995 by Employee Benefit Research Institute. All rights Chart 8, Overall Confidence versus Personal Expected Most Important Source of Expected Most Important Source of Apr. You Shouldn’t be Without BENEFIT reserved, No.191. Account (IRA) Rules “If you don’t know where you’re going, Retirement Income, Pre-Boomers, 1997 76% Retirement Income, Early Boomers, 1997 Preparation Confidence Self Confidents—Highly likely to rely on personal ............................................ 78% 10 67% 40 70 43% RESEARCH 40 37% 80 Having Enough Money for a Very 55% 65% Somewhat Not Too 50 Not At All Don’t Know/ 66% 38% 36% 23% Contents 64% 64% 36% Don’t Know Since 72% 63% 33% 28% savings in retirement. High personal confidence. 71% Anxious Unprepareds 12% 63% 64% 80 May 70 Money Workers Put into a Retirement Saving Plan Chart 9, False Confidence?............................................ 69% 11 Planning: Results of the 1997 Confident Confident Confident Confident Refused Comfortable Retirement Don’t Know 67% Good Understanding of How the Social Security INSTITUTE 21% 41% 23% 13% ® you will end up somewhere else.” Never Considered 33% 70 30% 3% 60 3% Very Clear55% 35 Through Work 58% 32% 32% 32% 40 57% 8% 27% 27% Chart 10, Retiree Confidence Levels 48% 5% ............................ 13 60 System Works 7% 31% Setting Up an IRA 1% 55% Government Dependents—Highly likely to rely on 26% 16% 1% 3060The Employee Benefit Research Institute (EBRI) was founded in 1978; its mission is to contribute to, to Percentage 60 26% Self Confidents 26% 60 51% Jun. Personal Financial 38% 25% 24% Very Confident 50 The EBRI Databook on Employee Benefits 35% 32% 25% is a statistical reference 32% Introduction ..................................................................... 4 3 24% 31% Not Too/Not At All Confident 51% 49% —Yogi Berra Chart 11, Worker Usage of 401(k) and Similar Social Security in retirement. Unlikely to rely on other 49% 23% 30 30 19% 14% encourage, and to enhance the development of sound employee benefit programs and sound public policy through 27% 27% 27% 4 Fourth Edition Preparation for Retirement Believe Medicare Will Be Social Security Will Continue to Provide Benefits Total 46% 25% 26%43% 17% 13% 1% 1 25% Other Personal Savings or Investments 50 savings or plans in retirement. 39% Plans and Dreams 50 44% ............................................................ 4 40 volume on private and public employee benefits programs and 4 Very Confident Will Have Enough Money Retirement Confidence Sur 50 40 Plans .......................................................................... vey 14 objective research and education. EBRI is the only private, nonprofit, nonpartisan, organization committed to 42% 21% 7% 36% 32% Providing Benefits at Their Somewhat Confident of Equal Value to Those Received by Retirees 2 41% 18% Pension Planners 26% Jul. 17% Somewhat Confident 37% 20 25 20 Gender 7 for a Comfortable Retirement 43% 39% 40 (chart 1, chart 2, chart 3) 17% 38% Having Enough Money for 30 work force related issues. The data are compiled from multiple 33% Retirement original public policy research and education on economic security and employee benefits. Through its activities, 9 Chart 12, Worker Education in Retirement Plans....... 14 Today 36% 3 23% 39% Concerned Savers—Lowest faith in Social Security 6% 24%20% Male 9 32 40 38% 16 11 2 28% 40 21% 19% Government Dependents 23% 20 EBRI 40 Basic Expenses Increase Payroll Taxes on Workers 25% Planning or Lack Thereof EBRI is able to advance the public’s, the media’s, and policy makers’ knowledge and understanding of employee ................................................ 5 30 18% 10 Increase payroll taxes on workers Not Too Confident and Medicare. Most likely to rely on a saving plan 20 Employer-Funded Retirement Plan 20 authoritative sources in table and chart form, supplemented with Chart 13, Perceived Clarity of Individual Very Confident 5 42% Female 5 18 47 19 15 Very Confident in Personal Financial 1 Aug. 15% 33% 32% Databook 27% Do Not Believe Medicare by Paul Yakoboski and Jennifer Dickemper benefits and their importance to the nation’s economy. EBRI’s membership represents a cross section of pension 31% 10 through work in retirement. 17% 17% (chart 4, chart 5) 38% 17% 33% 35% 15% 24% Preparations for Retirement 30 Good Understanding of How the Medicare 29% Retirement Account (IRA) Rules 20 27% 19% .............................. 15 Having Enough Money for on 10 brief explanations of the information. The book, which is over 500 0 0 Will Be Providing Benefits Region 0 Decrease Benefit Levels for Retirees 21% 27% 10% Decrease benefit levels for retirees Not At All Confident 15 30 funds; businesses; trade associations; labor unions; health care providers and insurers; government organiza- 12% System Works Medical Expenses Participation Among Participants Who Those Who Contribute 7%Percentage Expecting Source to be Most I am very Retirement Confidence .................................................... Employee 8 Participants Tending In general, most at Their Retirement I am somewhat Sep. Northeast 26 43 Chart 14, Americans’ Confidence in Social Security 19 11 1 10 0 pages long and contains more than 400 tables and charts, is Pension Planners—Highly likely to rely on an Social Security 9 tions; and service firms. 22% 20 Benefits • Workers Covered by The 1997 Retirement Confidence Survey (RCS) focuses on American workers’ Know the Maximum the Maximum (Among Importantconfident that I to Use Money for people save 3 confident that I that many adjust their behavior, e.g., change their and needing to pay benefits at reduced levels. surprisingly 1996.South Seventeen percent of workers report that since 0 24 According to the 44 other parties is to create retirement planners who then RogersCasey and the Institute of Management and and Associates (MGA), and the American Savings 20 11 1 Not surpris- Not Me, But You .......................................................... Very Confident in Personal 8 Somewhat Confident in Not Confident in Personal Other Surveys Find: The Public Agenda/Fidelity study 10 Concerned Savers 21% 30% employer-funded plan in retirement. Highest personal Other Surveys Find: The Merrill Lynch survey found 38% Other Surveys Find: In the PaineWebber/Gallup sur- and Medicare 28% ............................................................. 16 7 Having Enough Money for 5 0 organized into five sections—overview, retirement programs, will have enough 20 a 401(k) or Similar They Can Contribute Those Who Know Nonretirement enough to live will have enough Medicare Will Continue to Provide Benefits of Midwest All Workers Pre- 26 Older Early 45 Younger Late Generation 12 Males 14 Females 3 retirement planning and saving behavior. It also examines their confidence Financial Preparations Personal Financial Financial Preparations confidence. contribution levels or asset allocations in retirement January 1, 1993, they have left—before retirement—a though, the When forced to express a preference for changes Administration. The RogersCasey/IOMA 1196 Defined Oct. Merrill Lynch. “Planning for the Future: How Americans 2 1997 Retirement save accordingly. The task will not be easy; many Education Council (ASEC), and sponsored by various ingly, overall (chart 6) found that 68 percent of respondents admitted that they Leisure Pursuits 23% 9% 37% 30% 5% All Workers Pre- Early Late Generation that 19 percent of workers consider themselves very 10 0 The Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) performs the charitable, Plan the Maximum) Chart 15, Meaning of “Trust Fund Exhaustion” vey, 26 percent of investors reported needing money for a Purposes Percentage Expecting Source to be Major 1 Boomers Boomers Boomers Boomers Boomers X comfortably money for a Equal Value to Those Received by Retirees West 27 37 20 16 0 5 for Retirement health programs, other employee benefits, and appendicies. Preparations for Retirement for Retirement regarding various aspects of retirement, as well as their views on key policy issues. Employment 20% in the Social Security system, Self-Confidents are the saving plans. job from which they were eligible to receive a lump-sum likelihood of Save for Retirement and Other Goals,” The Eighth workers see no value in such efforts because they do not Contribution Survey, 1996. Boomers Boomers Boomers X could save more for retirement if they really tried. The educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization supported by Not at All Clear comfortable 3 More Confident, Less Confident ................................. Confidence 8 private organizations, focuses on American workers’ throughout comfortable confidence levels Today well prepared for retirement, 51 percent somewhat 011020 3040 5060 $1 million or more, 48 percent responded $200,000– to Americans 7080 90 .............................................................. 100 16 EB 10RI Source: 1997 Retirement Confidence Survey. Anxious Unprepareds—Low personal confidence. Somewhat Clear Source: 1997 Retirement Confidence Survey. Race 5 Nov. Not Too Clear retirement 0 It explores current retirees’ attitudes and experiences, providing context for today’s 1 4% contributions and grants. retirement retirement Kemper-Roper survey found that only 11 percent of re- 2 most likely (44 percent) to choose benefit level reductions distribution from a retirement plan. One-third having done such Intr Annual Merrill Lynch Retirement and Financial To some, “more and better” education may seem 0 oduction (RCS) feel they could save more, and besides, retirement is so Roper Starch and Kemper Financial Services. Kemper- (chart 7) Source: 1997 Retirement Confidence Survey. Survey retirement planning and saving behavior. It also exam- Least likely to rely on an employer-funded plan, saving are highly 34% 8 prepared, 15 percent not too prepared, and 15 percent Chart 16, If Forced to Choose, Americans’ Preferences White 27 44 $999,999, and 26 percent said less than $200,000. 16 11 1 Total Pre-Boomers Early Boomers Late Boomers Generation X Males Females 0 10 20 30 40 50 60 70 80 90 100 The Databook’s appendicies cover general economic and demo- 10% Percentage 0 10203040 5060 All Workers Pre- workers’ actions and attitudes. This Early Late Generation Males Issue Brief Females discusses the 1997 RCS findings. spondents strongly agreed that they are prepared to 5 through work or other personal saving. Percentage Who Percentage Who Percentage Expecting as opposed to payroll tax increases. When forced to a simple-minded answer to a complex issue. But better (34 percent) reported that they left some or all of the a calculation is EPlanning Survey, 1996. MPLOYEE Source: 1997 Retirement Confidence Survey. 4 Nonwhite 18 Americans would 41 far away. Moreover, at a deeper level, some simply want ines their confidence regarding various aspects of Roper Retirement Monitor. 22 18 June 1995. correlated with 1 Confidence in Personal Preparation Source: 1997 Retirement Confidence Survey. 4 Chart 3c ........................... 9 Chart 3d 0 Source: 1997 Retirement Confidence Survey. not at all prepared. The John Hancock survey found for Social Security Reform ........................................ 17 Percentage Dec. Boomers The American Savings Education Council (ASEC) is a part of EBRI-ERF. ASEC is a coalition of over 200 private- Boomers graphic statistics, explanations of the source material, and a Boomers X 3 Expext to Retire at Source: 1997 Retirement Confidence Survey. to Work Part Time in Percentage Who Percentage Who Would Like to Retire spend less today to save more for retirement (44 percent material and/or attending the seminar. Worker educa- Source: 1997 Retirement Confidence Survey. EBRI service provider as the most helpful sources of informa- answers are not readily apparent. Furthermore, in an choose among changes to the Medicare system, Govern- money in their former employer’s plan. These are even lower PaineWebber and the Gallup Organization. The Index of Source: 1997 Retirement Confidence Survey. Expected Most Important Source of to hide from reality and hope things will work out. Yakoboski, Paul, and Allen Schiffenbauer. “The Reality Expected Most Important Source of Percentage Source: 1997 Retirement Confidence Survey. Total Pre- Older Younger Generation Males Females (chart 8) 5 The implications of such a lack of planning are like to retire, and retirement, as well as their views on key policy issues income levels Household Income 32 percent of 401(k) participants were not concerned EMPLOYEE Chart 17, Do Workers Believe Medicare Will Be To put these numbers in perspective, assume a BENEFIT 9 and public-sector institutions. ASEC's goal is to make saving and retirement planning a vital concern of Age 55 or Younger at Age 55 or Younger Retirement • BENEFIT One-third of workers would like to retire at age 55 or younger. 8 9 selected legislative history. somewhat agree). A recent study by AARP found that Retirement Income, Late Boomers, 1997 Boomers Boomers Boomers X Retirement Income, Generation X, 1997 tion programs do appear to influence individual Source: 1997 Retirement Confidence Survey. Under $25,000 RESEARCH 10 29 tion. The next most helpful source of information is a 29 30 3 Other Surveys Find: In the ACLI study, among indi- ment Dependents appear to prefer raising the eligibility era when workers have more tools at their disposal to retire early, but making that dream a reality may elude instances of benefit preservation that are typically among those who are somewhat confident (32 percent) Investor Optimism: The PaineWebber/Gallup Poll of However, failure to meet this challenge could have dire of Retirement Today: Lessons in Planning for Tomor- 3 that dreams and expectations may go unfulfilled for False Confidence? 6 ...................................................... 10 such as Social Security and Medicare reform. In addi- among current workers (table 1). Among those with Americans and in the economic interests of employers. Partnership is open to any organization that shares this INSTITUTE 1997 about not having enough money in retirement, single man, age 65, purchases a life annuity There When They Retire? ......................................... today. 18 Sixty-nine retirement income prospects has risen from 19 percent in 40 percent of low-income pre-boomers (ages 45–52) felt $25,000–$34,999 An EBRI-ERF 16 46 Saving Thr 17 ough W 18 ork 2 RESEARCH4 Why haven’t more individuals contributed to an Publication behavior. First, 45 percent of those using the educational 0 financial professional, followed by spouse/friends/co- viduals who had focused on retirement, over one-half plan for retirement and more vehicles available to save age as opposed to increasing taxes or making Medicare many. The path ahead for those who do not plan and missed by most publicly available survey data. There- and those who are not confident (17 percent). Investor Attitudes, July 1997. goal. Inquiries regarding ASEC should be directed Don Blandin, (202) 775-9130; email to: blandin@asec.org; or consequences in the future, not only at the individual tion, it explores current retirees’ attitudes and household incomes under $25,000, 10 percent are very row.” EBRI Issue Brief no. 181 (Employee Benefit (chart 9) many. Workers may already have a sense that this will faith that Social Security and Medicare will continue to 45 percent were somewhat concerned, and 23 percent 4 • 7 Fifty-one percent of workers expect personal saving to be their most important With $250,000, he could purchase a Chart 18, Segmenting the American Population Source: 1997 Retirement Confidence Survey. than the others to report they have attempted to figure nominal monthly ......... 19 7 percent of $35,000–$49,999 19 52 1993 to 25 percent in 1997, while at the same time the 16 12 2 generic reforms. The most preferred reform was chang- Source: 1997 Retirement Confidence Survey. 4% and people with large families. Most are employed full 4% that their lack of income was not insurmountable as a Also included are: a glossary, a source organizations list, a federal to be their most important source of retirement income material report that it led them to begin contributing to Relief Act of 1997. By the same token, financial institu- Saving on the World Wide Web at www.asec.org. workers, and finally newspapers and magazines. The debate over Social Security’s long-term financial condi- IRA? Part of the reason may be as simple as a lack of 10% function like an HMO. Self-Confidents, Anxious for retirement, in many instances on a tax-preferred fore, such data sources underestimate the true degree of Prisuta, Robert H. “Saving Behavior and the Pre- Examining the same numbers from a different 11% level but also for businesses with worker populations Other Surveys Find: In a 1996 survey by the American Research Institute, January 1997). expressed a preference to receive information through 17% INSTITUTE8 21% save can be perilous, and at some level Americans know be the case. While 33 percent would like to retire at age Other Aspects of Confidence $50,000–$74,999 ® ..................................... 39 1039 experiences, providing further context for today’s work- confident and 59 percent are not confident that they will 16 5 0 X’ers are the most likely to be not at all confident in their were very concerned. The Kemper-Roper study found source of retirement income.annuity for life of $2,214. With an annual inflation rate spikes downward. In past cycles this movement tended provide benefits of equal value. Self-Confidents are workers report fraction not confident has risen from 26 percent to out how much money they need to save for retirement According to the RCS, 76 percent of workers offered a 3% problem in saving for retirement. ing Medicare to resemble a health maintenance time, and the average age is 44. Large proportions have (chart 2). Examining the data by generation, shows that and congressional agencies contact list, and an index. tion. Thirty-six percent reported in the RCS that they understanding regarding IRA eligibility and usage rules. the plan. In addition, the RCS found that among users of tions are certain to more aggressively market IRAs to Over $75,000 41 47 least useful or unused information sources are computer 10 3 0 written materials and face to face discussion, 23 per- Unprepareds, and Concerned Savers would prefer to see basis, education may be the best answer if one takes a it. They also know that Social Security and Medicare benefit preservation that is occurring because they do angle reveals that among those who have done a saving Retirement Population.” Unpublished AARP unable to retire when the time comes, and for the nation Yakoboski, Paul. “Are Workers Kidding Themselves? Council of Life Insurance (ACLI), 41 percent of 55 or younger, only 15 percent expect to retire then (table 1) ers’ actions and attitudes. This is the seventh year the have enough money to live comfortably throughout relying on personal saving, both through employment- that 29 percent of respondents were absolutely financial preparations (12 percent). of 4 percent, this monthly annuity would be worth (51 percent of Self Confidents and 40 percent of Pension to be predominantly into and out of the somewhat having money 30 percent (chart 7). ISBN 0-86643-089-X $99.00* organization (HMO) by using a restricted network of household incomes between $25,000 and $50,000. Table 401(k) or similar retirement saving plan at work contrib- EBRI Issue Briefs are monthly topical periodicals providing expert evaluations of employee benefit issues and this is true for 42 percent of pre-boomers, 37 percent of 23% are not confident that they have a good understanding of According to the 1997 RCS, only 16 percent of all work- educational material, 49 percent report that it lead them the public and educate the public regarding their advan- Personal Savings software/internet/on-line services, followed by radio or workers expect to work part time in retirement. Among nonretirees reported not having begun to think about cent said computer software, and 23 percent said long-term perspective and avoids the temptation of Medicare changed to resemble an HMO. alone will not cover their needs. However, finding the not account for potential distributions that do not occur. needs calculation, 49 percent are very confident in their manuscript. 1995. • Three-quarters of workers have no idea regarding how much money they need to in the form of severe strains on federal programs such as RCS has been conducted. retirement. Among those with household incomes of Results of the 1995 Retirement Confidence Survey.” Retirement Today Today .......................................................... 11 (chart 1). Similarly, while 65 percent would like to retire based plans and outside such plans, for their retirement delighted or pleased with the money they have saved $1,496 in 10 years and $1,011 in 20 years. With Planners.) Both groups report they began saving for Men tend to be more confident than women. trends, including critical analyses of employee benefit policies and proposals. Each issue, ranging in length from saved for retire- confident group. However, the change between 1996 and The reason cited second most often as most ute to the plan. Of these, however, only 65 percent know Those somewhat confident have decreased over health care providers, followed by increasing the eligibil- Pension Planners have the highest levels of 30% early boomers, 55 percent of late boomers, and pay out benefits at a reduced level. Thirty percent forced to choose, 63 percent chose increased payroll taxes 31% Have saved 30 48 15 6 4 to reallocate their money among the investment options tages. This is likely to increase the public’s television. how the Social Security system works (chart 14). While ers report that they have a very clear understanding of seeking the silver-bullet, quick-fix solution. As is shown here, “leaving the money behind in the plan” personal financial preparations, 39 percent are some- Public Agenda and Fidelity Investments. Miles to Go: A Social Security and Medicare. pre-boomers, this figure is 67 percent; among early retirement finances and in the Kemper-Roper Retire- EBRI Issue Brief on-line. no. 168 (Employee Benefit Research accumulate for retirement. will and means to make the necessary financial arrange- before age 65, only 45 percent expect to retire then. (chart 10) 32% Table 1, Workers’ Confidence in Having Enough $75,000 or more, 41 percent are very confident and This Issue Brief discusses these issues and other 16–28 pages, throroughly explores one topic. Subscriptions to Thirty-two percent of men are very confident in their EBRI Notes are included as part of EBRI and/or will save for retirement, and 30 percent were $1 million, he could purchase a nominal monthly annu- important for not doing a retirement savings needs 1997 was on net completely a movement from the income. Fifty-three percent are men, and the average age ment that was time. These are individuals who are really unsure; if retirement on average around age 30. Have not saved 14 32 the maximum that they are allowed to contribute, and of 24 27 6 10% ity age for Medicare benefits from 65 to 67, followed by incorrectly believe that it means the system will be overall confidence in having enough money for a comfort- 61 percent of generation X’ers. Fifty-two percent of male and 32 percent chose decreased benefit levels (chart 16). this number is at its lowest point since the question was the eligibility rules for making tax-deductible IRA 5% offered, and 38 percent said that it led them to change understanding of IRAs and increase their usage. Status Report on Americans’ Plans for Retirement, ments is hard at all ages and income levels. Yet, as the is a significant source of benefit preservation. what confident, and 11 percent are not confident. While membership or as part of an annual $224 subscription to Employers as boomers, 69 percent; late boomers, 78 percent; and findings from the 1997 RCS. It also draws on findings 13 percent are not confident. Among those who have ment study, 26 percent of respondents reported not Institute, December 1995). EBRI Notes and EBRI Issue Briefs. Individual copies Saving Today When such retirement savings needs calcula- .................................................................. 12 Money for a Comfortable Retirement ....................... 12 is 42. They also tend to be white. Large proportions are somewhat satisfied, leaving 41 percent as not overall retirement income prospects, compared with ity for life of $8,856. Again assuming a 4 percent annual Anxious Unprepareds have the highest propor- calculation was, “It is too far in the future to know what fraction who are not confident to the fraction who are accumulated on a regular basis. Younger generations everything goes okay and they encounter no surprises, increasing payroll taxes for current workers. These able retirement, confidence in covering basic expenses in these, less than one-half (48 percent) contribute the completely broke and unable to pay any benefits (in Generation Other Surveys Find: According to a recent American workers and 50 percent of female workers expect some • Twenty-five percent of workers are very confident that they will have enough money The majority of each generation chose increased payroll Dental & Vision Care Plans Fundamentals provides a straightforward, basic explanation of first asked in 1992, it is still only slightly below the contributions. Thirty-four percent report that they find of Notes and Issue Briefs are available for $25 each, prepaid, by calling EBRI. the amount they contributed to the plan (chart 12). confidence is higher than among those who have not In addition, 42 percent of workers reported generation X’ers, 71 percent (chart 1). For some, but not having given any serious thought to retirement. RCS shows, the consequences of not planning ahead can 1997. retirement plan Americans are from retirement surveys conducted by other organiza- already begun to save for retirement, 30 percent are very American Saving Through Work ............................................... 13 tions are undertaken, the most commonly used source of 18 percent of women; in addition, 34 percent of women The RCS asked workers who had not attempted self-employed or full-time workers. Relatively high satisfied. Pre-boomer (1945 or earlier) 31 36 inflation rate, this would be worth $5,984 in 10 years tion (25 percent) who say they have not thought about 19 13 Fifth Edition 1 were less likely to have retirement savings, but even will be needed” (26 percent). Men were more likely than very confident. This latter occurrence may be explained then they think their retirement will turn out okay. maximum (chart 11). Among those not contributing at all rankings were consistent across generations, except for retirement, and confidence in having enough money for form of personal saving to be their most important addition, 12 percent responded that they do not know) taxes, although generation X’ers were the least likely to Express FES Education Survey, 85 percent of consum- to live comfortably throughout retirement, 43 percent are somewhat confident, and employee benefits in the private and public sect It is apparent ors. Each chapter 38 percent figure reported in 1992. Respondents were the rules somewhat clear, and 14 percent find the rules EDependent Car RISA e rolling over some or all of the money into an individual done such a calculation (22 percent very confident), this sponsors, plan dreaming of early most, money does appear to be a significant source of Council of Life Early boomer (1946–1953) 27 46 14 12 1 be seen in the experiences of current retirees, many of information is books and articles, followed by a profes- (chart 11, chart 12) the calculation—why not? “It will not be helpful because tions to paint as complete a picture as possible of what is confident and 21 percent are not confident. This com- are not confident in this regard, compared with and $4,044 in 20 years. women to cite this as being their most important reason by the strong performance of equity markets during that among generation X’ers, 65 percent report having such proportions have never been married. They tend to be Otherwise, they feel they will be in trouble. As more retirement at all. In addition, 8 out of 10 Anxious Plans and to an available plan, the top three reasons cited were Other EBRI Publications Include: EBRI Notes is a monthly periodical providing up-to-date information on pre-boomers, who made increasing the eligibility age for (chart 15). The younger the individual, the more likely Other Surveys Find: In a Rogers Casey/Institute of recreation, entertainment, and travel. They are the most source of retirement income (chart 3a–f). favor it (57 percent). Sixty-seven percent of women chose ers prefer to obtain information, including 30 percent are not confident. Late boomer (1954–1964) 19 47 asked what they believe the term “trust fund exhaustion” not too clear or not clear at all. In addition, 31 percent of 18 13 2 that many Only 36 percent of current workers have tried to Education Assistance focuses on a particular plan or issue, offers an historical perspective whom are finding retirement financially difficult. retirement account (IRA), and 8 percent reported a demonstrates that doing the calculation is only a first service providers, retirement. motivation; in the RCS, 20 percent of current workers known regarding these issues. pares with 14 percent and 51 percent, respectively, for Insurance. sional advisor. Employer-provided financial planning Lump-Sums and Rollovers ........................................ 14 I cannot save any more than I am currently saving” was Conclusion college graduates and have higher levels of education. 27 percent of men. In terms of personal financial prepa- Unprepareds, Concerned Savers, and Government (31 percent, compared with 21 percent of women). While time period. savings. The figure for pre-boomers is 76 percent. Men More Confident, Less Confident a variety of employee benefit topics. EBRI’s workers develop a clearer feeling on the issue and move This Washington Bulletin Issue Brief was written by Paul Yakoboski , provides sponsors with short, timely Social Security/ Evaluating a Benefits Package Medicare benefits from 65 to 67 their first choice. Generation X (1965 or later) 26 41 confident that Social Security and Medicare will continue inability to afford to save, saving for other goals, and the 20 12 1 this response. Nearly one-half (48 percent) of generation Management and Administration (IOMA) survey, information on financial topics such as retirement, increased payroll taxes, compared with 58 percent of means and were given two choices—(1) the system will workers do not know because they have never looked rollover into a new employer’s plan. Therefore, when step and in itself does not generate personal confidence. other financial According to the Americans do expect employment to be a major source of income during determine how much they need to save by retirement to Monitoring on plan dev The nature of retirement may also be changing. elopment, describes plan characteristics, and e References those who have not yet put aside any retirement savings xplains The primary lesson from the 1997 RCS for IRAs ........................................................................... 15 worksheets and information tie for third, followed by updates on major developments in Washington in employee benefits. rations for retirement, 36 percent of men are very cited as a reason by 56 percent of respondents (chart 5) EBRI Fundamentals of Employee Self-confidents are found spread across income groups, Dependents have not attempted to determine how much Not Me, But and women are equally likely to have retirement of EBRI with assistance from Jennifer a form of denial, there is justification in that it does not Despite the trends, the relative ranking remains from the ranks of the unsure, they do not all move in the difficulty in withdrawing funds. Nonparticipating men • Among those who are very confident in their personal financial preparations for to provide benefits of equal value to today’s. They tend to ERISA 75 percent of responding 401(k) plan sponsors said Dr X’ers believe trust fund exhaustion means system eams men. Among those favoring benefit cuts, there was a through the workplace. Fundamentals Education Assistance not under- be completely broke and unable to pay any benefits or fund a comfortable retirement (this figure is up slightly into making a deductible IRA contribution (chart 13). preservation does occur, it is most likely to occur by Apparently, some may even have their confidence Source: 1997 Retirement Confidence Survey. institutions, 1997 RCS, one- their retirement (9 percent expect it to be the most Attitudes of the Benefit Programs offers a straightforward, basic explanation of employee benefit programs in the private and According to the RCS, Americans are beginning to see friends/relatives/co-workers. Of the sources asked about, Over the past five years, American workers have grown (chart 13) Other Surveys Find: In a recent survey by Public the tax implications of the benefits. and as the most important reason by 31 percent. Women policymakers, retirement plan sponsors, and plan service (table 1). confident in what they are doing, compared with of Employee make sense to attempt to be too precise too early in a unchanged over the five years. Most workers are some- savings. but they are more likely than other groups to have same direction; some become very confident and some money they need to save for retirement. More than Dickemper of Mathew Greenwald & Associates, were more likely to cite saving for other goals as a reason retirement, relatively few (55 percent) have done a retirement saving needs calcu- that participation rates in their plan increased due to bankruptcy, compared with 18 percent of pre-boomers. Survey rely on employer-funded plans for their retirement You Medicare fairly even split when forced to express a preference for Retirement Health Care Cost Management (2) the system will have fewer assets and will have to Benefit public sectors. EBRI Databook on Employee Benefits stand the from 32 percent in 1996). Forty-four percent of pre- is a statistical reference volume providing tables and policymakers, and the media have been successful in retirement not simply as a time when they lie back and rollover to an IRA or leaving the money behind in the old shaken by such an exercise, and this is probably benefi- third of current important source). providers is that workers need to be motivated beyond Comparing current workers across generations, Public. Unpub- Social Security/Medicare computer software/programs were by far the least more confident about their overall retirement income Agenda and Fidelity Investments, 60 percent of re- ............................................... 15 were more likely to cite this as their most important higher income levels. 27 percent of women. three-quarters (78 percent) of Anxious Unprepareds have working career when it comes to planning for retirement. what confident, followed by those who are not confident, Among pre-boomers who responded to a separate become not confident. Inc. and the Institute’s research and editorial Programs lation. respondents income. This group has a high proportion of men, Cauca- (38 percent versus 26 percent for women), while women This is not surprising, given that 52 percent of genera- participant communication. charts on private and public employee benefit programs and work force related issues. Flexible Benefits how to make the cut. Thirty-three percent favored Chart 3e Other Surveys Find: The Public Agenda/Fidelity Chart 3f creating retirement savers. Most workers have begun to workers would like to retire at age 55 or younger, and Segmenting the employer’s plan, not via rollover into a new employer’s cial for many. Once the calculation has been completed, a Lump-Sums and Rollovers boomers have done such a retirement saving needs relax, but as a time when they pull back from the rigors current levels to lished. May 1996. late boomers show the lowest levels of overall retirement plan financially for their retirement. (chart 14, chart 15, chart 16, chart 17) in retirement, another 24 percent report that their frequently used, but this is likely to change in the future. prospects. At the same time, American workers have spondents said that individuals, not government and reason (34 percent, compared with 28 percent of men). This all ne Government Dependents are middle-of-the-road w 5th edition addresses all of the tax law and regulat expenses has been worse than expected. not personally saved any money for retirement. In fact, ory question in the RCS regarding the amount held in The 1997 Retirement Confidence Survey was funded by staffs. Any views expressed in this article are But it is sensible to develop a ballpark estimate of what while those who are very confident account for the fewest were more likely to cite inability to afford to save It is also interesting to note that there is a Only 6 percent of were seg- sians, married people, and those without children for tion X’ers are not confident in their understanding of Expected Most Important Source of raising the age for retirement with full benefits to 70, Expected Most Important Source of study found that only 35 percent of single earner calculation, compared with 38 percent of early boomers, Confidence save for their retirement. Moreover, it is becoming two-thirds would like to retire before age 65. Among pre- plan. savings plan is needed to achieve the target. American Express Financial Advisors. Americans HMOs & PPOs Segmenting the Population of a full-time career to work part time while simulta- grown less confident about their overall retirement employers, have primary responsibility for retirement ........................................... 18 While almost 70 percent of working Americans have Other Surveys Find: The Public Agenda/Fidelity confidence and pre-boomers appear to be most confident. standard of living is worse now than it was at the end of • Sixty-nine percent of workers report having money saved for retirement. is needed and how much needs to be saved to achieve workers. retirement savings plans (including employer contribu- confident on nearly all aspects of retirement. They have changes since 1990 and has ne Other activities undertaken by EBRI include educational briefings for EBRI members, congressional and federal grants from the following organizations: AARP, AT&T, w chapters on ERISA, Re strong correlation between the fraction who are not large proportions of both Anxious Unprepareds and those of the author and should not be ascribed to tiree Healt Forty-four percent of retirees retired h earlier than (55 percent versus 40 percent for men). all Americans Retirement Income, Males, 1997 Chart 15 Retirement Income, Females, 1997 how the system works, compared with 23 percent of mented into whom they are financially responsible. The average age Other Surveys Find: The PaineWebber/Gallup survey 37 percent favored decreasing cost-of-living-adjustments RCS participants were also asked about the What do workers do with their retirement savings when couples knew of the increase in the spousal IRA contri- Retirement Planning 32 percent of late boomers, and 30 percent of generation boomers, 17 percent would like to retire at age 55 or increasingly clear that individuals are seeking educa- neously enjoying some of the fruits of their labor. This Finally, a significant percentage does report Unprepared for Financial Future begun to save for retirement, at least three-quarters of Men tend to be more confident than women. Whites are . January 1997. income prospects. Both of these statements are true. The (chart 18) security. Similarly, in a 1997 Merrill Lynch survey, study found that 53 percent of Americans ages 22–61 Population agency staff, and the media; public opinion surveys on employee benefits issues; special reports; and policy their working career. the highest levels of faith that Social Security and Meaning of “Trust Fund Exhaustion” to Americans they had planned. For many, this appears to have been Government Dependents report they have no assets in that goal. Then such planning can be revisited every tions), 31 percent reported retirement accumulations of American Council of Life Insurance, American Express confident and election years. In even years, the fraction the officers, trustees, members, or other sponsors Flexible Benefits Benefits, Health Promotion Programs, and Employee Assistance (both workers five groups is 53, and most are employed full time or are retired. found 61 percent of investors planning to work after pre-boomers. they change jobs? From a retirement income security (COLAs) that occur with inflation, and 26 percent usefulness of various sources of information in making bution limit that took effect in 1997. tional material that helps them with their saving and younger; among early boomers, 28 percent would like to leakage of money out of the retirement system. Twenty- • Seventy-six percent of workers offered a 401(k) or similar retirement saving plan X’ers. Thirty-nine percent of men have done a retirement affects how people view retirement income and where Other Aspects of Confidence studies. Consumer Federation of America and NationsBank. workers do not have a good idea of how much they need more confident than nonwhites. Workers in the Midwest Retirement Preparation ............................................ 19 rate their retirement preparations as fair or poor, and H 4% ealth Insurance fraction of workers who are very confident in their 71 percent of Americans said that individuals are In addition, while 38 percent of retirees are very 3% Medicare will continue to pay benefits, and they are by in some sense forced on them. Sixty-five percent cited retirement savings plans. Anxious Unprepareds, Govern- over $100,000, 18 percent reported accumulations of Financial Advisors, Aon Consulting, Barclays Global of EBRI, EBRI-ERF, or their staffs. Neither year or two and estimates can be refined in terms of Confidence in Personal Preparation and retirees) believe that, in general, people in the who are not confident spikes upward and in odd years it Programs; an expanded discussion of public-sect based on their or benef They are more likely than others to have graduate-level retirement, with 13 percent saying it will be primarily Other Surveys Find: The Merrill Lynch survey found its; and a Sixty-eight percent of Americans are not confi- 9% Chart 5favored cutting benefits for all recipients. 9% perspective, such saving is for naught if the money does their participation, contribution, and investment deci- saving needs calculation, compared with 32 percent of 2% ESOPs 23% retire in this age range; 37 percent of late boomers and investing decisions, and that such material does influ- three percent report saving some or all of the money in a 70 1% contribute to the plan. Of these, only 65 percent know the maximum that they are Planning for the Future: Are Americans Prepared to 66% Retirement Planning they see it originating. Social Security and Medicare primarily responsible for their retirement income se- ................................... 25% 19 to save for their retirement. Most have not even tried to that 76 percent believe they should be saving more for appear to be most confident, while workers in the West confident that they will have enough money to live increased precision as workers age and approach $50,000–$100,000, 32 percent reported $10,000–$50,000, far the most likely to rely on Social Security for retire- Investors, Citibank N.A., Fidelity Institutional Retire- changes at their company such as downsizing or closure, ment Dependents, and Concerned Savers on average EBRI nor EBRI-ERF lobbies or takes positions Why Workers Have Not Done a Retirement Savings Needs Calculation United States save enough money to live comfortably that only 38 percent of 401(k) plan participants con- answers to 13 questions regarding personal confidence in dent that Social Security will continue to provide series of public policy related chapters. Comprehensiv education. They tend to have household incomes between for the money. Different findings emerged from a e bibliographi- Pension Plans While current workers are not worried about covering Editorial Board As regards Medicare, 67 percent of Americans sions. Participants report their employer and/or plan not make it to retirement. women. Out of the 36 percent of current workers who allowed to contribute, and of these, less than one-half contribute the maximum. ence their decisions. This is encouraging news, especially 51 percent of generation X’ers would like to retire at 55 non-tax-preferred vehicle, and 30 percent report spend- Furthermore, there are differences between men Meet Their Financial Goals? determine the amount they will need. We have done a appear to be least confident (table 1). Workers were also asked about some specific 61% May 1997. Conclusion curity, and not the government or employers. ...................................................................... 20 retirement. The Kemper-Roper study found that only Planning Interestingly, 32 percent of workers are very confident comfortably throughout their retirement, 23 percent are ment income. Government Dependents tend to be 60% and 41 percent cited heath reasons. On the other hand, expect to retire at age 65. Prescription Drug Plans retirement. 8 percent reported accumulations under $10,000, and 24% ment Services Co., Investment Company Institute, John on specific policy proposals. EBRI invites 22% throughout retirement. While the absolute magnitude of retirement, confidence in the Social Security and Medi- Publisher: Dallas L. Salisbury Editor: Maureen Richmond Layout and Distribution: Cindy O’Connor $50,000 and $100,000. Kemper-Roper study, in which 59 percent of respon- tribute the maximum allowed and a John Hancock benefits of equal value to the benefits received by basic living expenses in retirement (44 percent are very cal lists, contacts for additional information, and a detailed index System Will Be Broke and 2 Chart 7are not confident that the system will continue to provide 57% 401(k) Arrangements because more remains to be done in the campaign for or younger (chart 1). ing at least some of the money and/or paying off debt. aspects of IRA usage by the RCS. While each question have done the calculation, 24 percent cannot give a and women and across generations in terms of how 60 Employee Benefit Research Institute. “Retirement good job of creating savers, but future retirement income References ...................................................................... 20 14 percent of respondents strongly agreed with the not confident. Other areas where a substantial minority that they are doing a good job of preparing financially for women, with a large proportion of widows. They also 56% 56%55% 62 percent reported that it was because they could afford 11 percent reported having nothing. Hancock Mutual Life Insurance Co., ManuLife Finan- comment on this research. Difficulty in finding the time was cited by this number may be surprising, the fact that such a Unable to Pay Any Benefits care systems continuing to provide benefits of equal Workers’ Confidence in Their Overall Retirement Income Prospects dents expected to have to work in retirement for survey found that 40 percent of 401(k) plan partici- Anxious Unprepareds are not confident about 60 retirees today (chart 14). This figure is down from its confident, and only 14 percent are not confident in this benefits of equal value to the benefits received by 28% also make this book an easy • Twenty-four percent of retirees report that their standard of living is worse now than -to-use yet thorough reference guide. 53% 28% figure when asked. This means that roughly three- IRAs retirement income security Confidence in America: Getting Ready for Tomorrow.” was answered correctly by a majority of workers, only 13% workers view retirement—for example, where they security will depend on creating goal-oriented planners statement that they are planning well for retirement. The experiences of retirees have some financial worries include: having retirement, 44 percent are somewhat confident, 11%Subscriptions/Orders: Direct subscription inquiries to EBRI Publications, (202) 659-0670; fax publication 39 percent as a reason for not doing the calculation, but tend to be white, and the average age is 62. Members of The distribution among early boomers is very cial, Massachusetts Mutual Life Insurance Co., to retire earlier than planned. In some cases, this could Social Security and Medicare Chart 12sentiment is widespread among the population should pants were maxing-out. value, and the importance of various sources of retire- peak of 73 percent in 1995, but is still higher than the any aspect of retirement. They do have some confidence financial reasons, and a study by Scudder and the regard), many are worried about having enough money retirees today (chart 14). In fact, 46 percent of workers 60 at the end of their working career. 48% Life Insurance quarters of all current workers have System Will Have Fewer no idea regarding orders to (202) 775-6312. A complete list of EBRI publications are available on the World Wide Web at http:// expect their money to come from during retirement. In IRAs More specifically, while Americans may dream EBRI 31 percent answered all three questions correctly (an who then save accordingly. The task will not be easy; Issue Brief no. 156 (Employee Benefit Research of current 50 55% enough money to cover medical expenses, having enough 14 percent are not too confident, and 9 percent are not Other Surveys Find: A 1997 PaineWebber/Gallup this group in general have lower levels of educational 50 Worker Education in Retirement Plans be the direct result of receiving early retirement buyouts HMOs & PPOs only 17 percent said it was the most important reason Char similar to that of pre-boomers. Twenty-seven percent ts and Table Milliman & Robertson, Inc., PaineWebber Retirement 45% not be. In 1991, 7 percent of Americans felt this way, and ment income. Twenty-six percent of the population (both that Social Security and Medicare will continue to National Center for Women and Retirement Research Retirement 65 percent first reported in 1992. Among workers, only Assets and Benefits Will to pay for desired recreational, travel, and entertainment 52% Despite the fact do not believe that the Medicare program will still be Employee Assistance Programs www.ebri.org. Employers; employees; union representatives; and members of the about retirement, and many in fact have already begun additional 41 percent answered two questions correctly). how much they need to save and accumulate for retire- addition, gender and generational differences exist in Institute, December 1994). many workers see no value in such efforts because they retirees provide 39% money to cover desired leisure pursuits, and simply survey of investors (households with savings of at least Pension Planners and Government Dependents report confident that they are doing a good job of preparing attainment and have low incomes. in instances of company downsizing. It is interesting to have retirement accumulations of over $100,000, Plans, The Principal Financial Group, The Prudential, Need to Be Reduced (chart 5). Being afraid of the answer was reported by • Twenty-three percent of retirees are not confident that they will have enough money since that time the number has consistently hovered in Only 18 percent of 401(k) or similar plan partici- workers and retirees) was classified as “Self-Confidents,” 50 provide benefits of equal value, but in some sense they (NCWRR) found that 43 percent of boomers with 39% False Confidence? pursuits, i.e., the rewards for a working career that 12 percent expect it to be their most important source of that many providing health insurance when they retire (chart 17). Previous research indicates that the overwhelming ment (chart 4). Chart 1, Retirement Expectations Among saving for retirement, most are not planning for retire- Planning or media, academia, and go 40 45%vernment who work on emplo Investment Company Institute. “Households with IRAs.” Thirty-six percent of workers do not know that all yee benefit and terms of current planning and preparation for retirement 86% the highest levels of confidence in understanding Social do not feel they could save more, and besides, retirement valuable lessons financially for retirement. Therefore, confidence in being confident that they did a good job in their financial $10,000) found that 35 percent of savers want to retire 40 43% The 1998 Retirement Confidence Survey 43% 29 percent as a reason, albeit not most important, for not 19 percent reported $50,000–$100,000, 31 percent Society for Human Resource Management, State Street note that among early retirees who reported that they pants report that they intend to tap into this retirement to live comfortably throughout retirement. that range. Change of Address: EBRI, 2121 K Street, N.W., Suite 600, Washington, DC 20037, (202) 775-6311; fax number, ISBN 0-86643-087-7 $49.95* 15 percent as “Government Dependents,” 21 percent as retirement income, while 22 percent do not expect it to have to because Social Security is what they are depend- incomes over $30,000 expect to have to work in retire- many associate with a “good” retirement. Twenty-five workers would Women are more likely to feel this way than men majority of those currently eligible to make deductible T 29% oday Don’t Know © 1997. 33% Current Workers ......................................................... 100 4 ment based on goals. The vast majority of workers do not and in degrees of confidence regarding future retirement economic security issues will find this book a handy ref Fundamentals workers can contribute to an IRA, 41 percent do not is so far away. Moreover, at a deeper level, some simply erence to (Investment Company Institute: May/ for current Security and Medicare. They also have the highest levels We are currently enlisting the support of organi- preparations for retirement (chart 10). personal financial preparation is greater than overall by age 55. 30% 40 could afford to retire early, 30 percent have seen their doing the calculation. Women were more likely than men reported $10,000–$50,000, 12 percent reported less than Retirement Preparation (202) 775-6312; e-mail to Publications Subscriptions@ebri.org. Global Advisors, TIAA-CREF, T. Rowe Price Associates, Even among workers who are confident, the question savings for purposes other than retirement, such as What is surprising is the “not me, but everyone “Concerned Savers,” 26 percent as “Pension Planners,” 37% ing on for retirement income. The average age of Anxious Not Too/Not at All Confident be an income source at all in retirement. ment (and 20 percent are not planning to retire at all). percent are very confident, while 29 percent of workers 30 like to retire (51 percent, compared with 41 percent). Sixty-four Other Surveys Find: The Scudder/NCWRR study found IRA contributions do not contribute. This fact, combined have a target savings level for what they will need to Chart 2, Expected Retirement Income Sources Employee 33% know that nonworking spouses can make tax deductible income security. June 1995). want to hide from reality and hope things will work out. workers and have on their desks. 27% 27% Lack Thereof When asked to compare experience with expecta- 80 • Many Americans do not understand the debate over Social Security’s financial of confidence that these systems will continue to provide zations that are interested in sponsoring the confidence in retirement finances (chart 8). This holds 30 standard of living decline since they retired, and $10,000, and 12 percent reported nothing. The Vanguard Group, and Zurich Kemper Investments, 20% to cite this as being a reason for not doing the calculation else” attitude expressed by many current workers remains: is this confidence justified? Interestingly, the borrowing to purchase a house (chart 11). Younger and 12 percent as “Anxious Unprepareds” (chart 18). Unprepareds is 50, and they are more likely to be 30% 49% are not confident in this regard. In addition, workers percent of generation X’ers feel this way, compared with relatively early 45% that only 21 percent of respondents had a nest-egg goal. 18% with concern over low rates of national saving and an ensure a comfortable retirement. It is difficult to develop Among Current Workers Benefit Membership: ............................................. Inquiries regarding EBRI membership and/or contributions to EBRI-ERF should be directed to 5 John Hancock Financial Services. IRA contributions (under certain circumstances), and Insight into Partici- 30 Somewhat Confident Self-Confidents and Pension Planners are thinking about The 1997 RCS, co-organized by the Employee 22% should serve as calls to action for them—don’t expect a However, there are reasons to be optimistic. across generations. The implication is that people worry tions, 16 percent of retirees report that their actual 26% condition. Thirty percent incorrectly believe that “trust fund exhaustion” means the benefits of equal value to those provided today. Con- 1998 EBRI/Greenwald/ASEC Retirement (34 percent vs. 23 percent). Twenty percent of all work- Other Surveys Find: The Public Agenda/Fidelity Twenty-five percent of generation X’ers and 20 Inc. 36 percent are now not confident that they will have 38% At the same time, many expect to work during 60 (chart 6). When asked how confident they are that aggregate data show a strong correlation between the workers were more likely to report such intentions. they Concerned Savers are middle-of-the-road in 24% women. This group also contains a larger proportion of worry about medical expenses; 24 percent are very and the fact that 55 percent of late boomers, 42 percent of early boomers, A recent survey by the Consumer Federation of America EBRI President Dallas Salisbury, 2121 K Street, N.W., Suite 600, Washington, DC 20037, (202) 659-0670; e-mail increasing focus on retirement income security, led to pant Knowledge and Behavior, The Fifth Defined What do current workers expect to be their Chart 3, Expected Most Important Source of Research Money Provided by Employer 18% Money You Put into Savings/ Social Security Other Personal Savings/ a plan to reach a goal when that goal has not been Benefit Research Institute (EBRI), Mathew Greenwald Money provided by Money you put into 28 percent do not know that it is possible to withdraw When it comes to their retirement income security, most comfortable retirement to just happen. There seems to be Social Security retirement the most—with 75 percent and 66 percent, cerned Savers, Anxious Unprepareds, and Self- *EBRI Members receive 55% off the regular price. Please indicate if you are a member when placing an order. system will be completely broke and unable to pay any benefits (in addition, 12 Confidence Survey. Sponsorship includes the standard of living in retirement has been worse than that circumstances they view as beyond their control, enough money to remain comfortable throughout ers cited as a reason that the process is too complicated, 15 percent of late boomers reported no retirement study found that 22 percent expect to get nothing from 20 percentage who are confident in their financial prepara- Twenty-eight percent of late boomers and 20 percent of will have enough money to live comfortably throughout retirement, which could signal a change in what it terms of confidence on nearly all aspects of retirement, unmarried persons than the other groups. They are less Very Confident confident, while 36 percent are not confident that they 40 to: salisbury@ebri.org Retirement Plans through Work 25% Investments most workers expect personal saving to be a major and 21 percent of pre-boomers. This may help explain and NationsBank found that only one-third of savers had 14% significant IRA expansion during the past two congres- 20 employer savings/retirement plans quantified. Furthermore, one must wonder whether Retirement Income, 1997: (a) Pre-Boomers, Institute- income sources in retirement? According to the RCS, money from an IRA before retirement age. 10 Contribution Plan Survey workers believe the buck stops with them, not their a popular perception among many that retirement is a , 1997. they expected when they retired. Twenty-four percent respectively, reporting they have given retirement a 12% percent responded that they do not know). Confidents are less inclined to believe they understand opportunity to provide input into the survey such as unforeseen medical expenses and/or cutbacks in 22% retirement. accumulations. Twenty-six percent of X’ers and Social Security. 11% with men more likely than women to cite this reason means to be “retired.” Seventy-two percent of current 21% their retirement years, 25 percent of workers are very tions for retirement (33 percent) and the percentage who generation X’ers intend to tap into their retirement and are particularly worried about having enough money likely to be employed full time and tend to have lower will have enough money to take care of their medical why 36 percent of workers are not confident that they source of income once they are retired, 37 percent of through work a comprehensive financial plan. In addition, even among 19% 19% sional sessions. 20 some of the confidence that is expressed is misplaced. (b) Early Boomers, (c) Late Boomers, Education National Center for Women and Retirement Research most current workers are looking toward their own IRAs surely have not become any simpler with employer and not Uncle Sam. As mentioned, most have carefree existence of golf, travel, and time spent with the Social Security and Medicare, may have negative finan- report that their experience has been worse than expec- great deal of thought. Majorities in both groups both the systems or that the systems will continue to provide design and content; sponsors will receive a copy Any views expressed in this publication and those of the authors should not be ascribed to the officers, trustees, members, or 7% 7% other (23 percent versus 16 percent). 20 percent of late boomers reported amounts under Of the 23 percent of retirees over age 65 who 10 confident, 43 percent are somewhat confident, 17 percent have done a retirement savings needs calculation savings, compared with 11 percent of early boomers and for medical expenses in retirement. They are the least 10 levels of education (60 percent have a high school degree 1 expenses in retirement. current workers report having given little or no thought 5% will have enough money to take care of medical expenses 0 planners only 48 percent had calculated what they need The Retirement Confidence Survey (RCS) is an annual survey that gauges savings (chart 2). Fifty-five percent expect personal (d) Generation X, (e) Males, and (f) Females • Assuming that adjustments must be made to Social Security, respondents were ............. 6 Without a goal and a plan in place to achieve that goal, and To order these or other EBRI publications, and Scudder, Stevens & Clark. the expansion of eligibility for contributions to deductible begun to save for retirement. Moreover, evidence is grandchildren. While many do aspire to this and many Baby Boom Generation would like to, and expect to, retire before reaching age Assuming that adjustments or changes must be made to sponsors of the Employee Benefit Research Institute, the EBRI Education and Research Fund, or their staffs. Nothing herein is 0 benefits of equal value. 2 Support from Children or of the full report and raw survey data. Please cial consequences for their retirement. tations in terms of having enough money for desired Part-Time or Full-Time have worked since turning 65, 56 percent cited wanting Don’t Know Pre-boomers consist of those born in 1945 or earlier; these individuals are $10,000. Thirty percent of X’ers and 43 percent of late Among those who have done the calculation and Support from children or Part-time or full-time (32 percent). But are they the same people? Further 8 percent of pre-boomers. Don't know are not too confident, and 13 percent are not at all likely to believe that Social Security and Medicare will the views and attitudes of working and retired Americans regarding Not Helpful Not Too Distant Too Distant to Difficult toor less). Anxious Unprepareds tend to have low house- Afraid of the Process is Don't Know to their retirement, according to the RCS. While high, when they retire. to maintain their standard of living in retirement. The Other Surveys Find: According to a recent survey by Workers Using Began Contributing Reallocated Assets Changed Contribution how can Americans be truly confident about their Chart 4, Workers with a Retirement Savings Goal Other Family to be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, or interpretative rule, or forced to choose between increased payroll taxes or reduced benefit levels; 63 percent ....... 4 savings through a retirement plan at work to be a major IRAs, the creation of two new types of IRAs (the nonde- as legal, currently ages 53 and older. Early boomers consist of those born during the Research Employment Retirement Preparation Survey mounting that retirement education campaigns can do achieve it, the RCS again found that a sizeable . 1997. travel, recreation, and entertainment expenses. Thirty retirement, their preparations for retirement, their confidence with regard to the Social Security system to ensure its financial viabil- 65. These groups put their money where their mouth is. other family Cannot employment contact EBRI Research Associate Paul These latter three groups are also more likely to Confidence in personal financial preparation is Helpful/Can Know What to Know Find the more money to buy “extras” as a reason. Only 2 percent Answer Too How to Find boomers reported amounts of $10,000–$50,000, and 0 responded with a figure for what they need to save for a confident. analysis reveals that even among those who are very Two-thirds of plan participants report that their continue to pay benefits of equal value to those received 0 Educational Material to Plan as Result of hold incomes (57 percent have less than $25,000). as Result of call EBRI publications at (4 Level as Result of 10) 5 Assuming that changes must be made to the 16-6946. period 1946–1953; these individuals are currently ages 45–52. Late boomers this percentage does represent an improvement over accounting, actuarial, or other such professional advice.study also found that having a plan affected saving levels Other Surveys Find: The Public Agenda/Fidelity the Investment Company Institute (ICI), 25 percent of various aspects of retirement, and related issues. The 1997 RCS randomly retirement income prospects? Chart 5, Why Workers Have Not Done a chose increased taxes and 32 percent chose decreased benefits. Save More source of retirement income and 39 percent expect other McGill, D.M.; K.N. Brown; J.J. Healy, and S.J. Schieber. ductible Roth IRA and the education IRA), and the Fund. Not Save Is Needed What is Time Complicated Help to Do It ity in the future, RCS survey respondents were forced to Total Pre-Boomers Early Boomers Late Boomers Generation X Males influence individual behavior. The overwhelming major- minority of current retirees are experiencing a retire- Females percent report that their health has been worse than generally lower the younger the worker. Late boomers Eight out of ten in each group have personally saved believe that Social Security trust fund “exhaustion” Yakoboski at (202) 775-6329 for more informa- 1993 When Provided 1994 1995 Educational Material 1996 1997 Educational Material comfortable retirement, 22 percent responded less than 19 percent of X’ers and 13 percent of late boomers Educational Material reported that it was because they needed more money to consist of those born during the period 1954–1964; these individuals are confident in their personal financial preparations for employer has provided them with educational material by retirees today. They are the most likely to rely on surveyed 1,001 individuals (772 workers and 229 retirees) by telephone in Self-Confidents, like Pension Planners, have current retirees, among whom 52 percent gave little or Medicare system to ensure its future financial viability, more than knowledge of saving and investment study found that 74 percent of Americans expect households owned IRAs, but only 5 percent made a personal saving to be a major source. Slightly more than Retirement Saving Needs Calculation ....................... 8 All rights Therefore, the next challenge facing plan spon- expansion of circumstances under which money can be ity of workers do take advantage of educational material Fundamentals of Private Pensions ment that is financially troubled. While 25 percent of all . Seventh Edition. currently ages 34–44. Generation X consists of those born in 1965 or later; express a preference between increased payroll taxes on money for retirement—compared with only two-thirds of Source: 1997 Retirement Confidence Survey. means that the system will be completely broke and tion or to sign up as a sponsor. are the least likely to be very confident in their financial expected, but only 16 percent said that their experience July 1997. Random digit dialing was used to obtain a representative cross- help make ends meet. Three-quarters said they wanted $250,000, 39 percent responded $250,000–$999,999, and reported amounts of over $50,000. For more information about EBRI and EBRI publications, retirement, relatively few (55 percent) have done a or seminars regarding the plan in the past 12 months, EBRI Issue Briefs is registered in the U.S. Patent and Trademark Office ISSN: 0887-137X 1085-4452/90 money they save through an employment-based plan. Source: 1997 Retirement Confidence Survey. Source: 1997 Retirement Confidence Survey. Source: 1997 Retirement Confidence Survey. high levels of confidence about most aspects of retire- Source: 1997 Retirement Confidence Survey. • The primary lesson from the 1997 RCS is that workers need to be motivated beyond no thought to retirement while working. 3 Americans were then forced to choose among three these individuals are currently ages 33 or younger. health care costs to pose a problem in retirement. tax-deductible contribution in 1994. principles. Chart 6, Workers: I’m Okay, You’re Not sors, service providers, policymakers, the media, and section of the U.S. population. ........................ 9 one-half (51 percent) expect some form of personal saving Assume $9.41 buys an annuity of $1/year payable monthly (McGill, 1996). withdrawn without penalty—all enacted in the Taxpayer reserved. when it is provided by their employer, with the result Philadelphia, PA: University of Pennsylvania Press, retirees report that their standard of living has improved in terms of having enough money to cover medical workers or reduced benefit levels for retirees. When the general population. Both groups are also more likely unable to pay benefits as opposed to having less money preparations for retirement (27 percent), and generation $ .50 +.50 to try a different career. 38 percent responded $1 million or more. retirement saving needs calculation (chart 9). Not and the vast majority, 86 percent, report using the This group has a high proportion of women, minorities, ment, although they are considerably less likely to have current levels to plan financially for their retirement and then save accordingly. visit our web site at www.ebri.org EBRI Issue Brief Number 191 • November 1997 • © 1997. EBRI 10 2 22 12 4 20 8 16 18 6 14 November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief November 1997 • EBRI Issue Brief 17 11 13 21 19 23 15 3 5 7 1 9 Percentage Percentage Percentage Percentage Percentage Issue Brief Issue Brief Percentage Percentage Percentage Percentage Reporting as a Reason Percentage Having Done a Retirement Savings Needs Calculation Percentage Agreeing with Statement

Volume 191

Pages 23

EBRI Issue Brief

Paul Yakoboski

Jennifer Dickemper

Retirement