Jan. December 1999 Feb. 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 Table 5, Estimated Total Retirement Assets in the What Next? Mar. Table 6 Ch Table 2 art 9 rate paid in Washington, DC. POSTMASTER: Send address changes to: Chart 6 Ch Chart 5 art 2 EBRI Issue Brief Table 10 , 2121 K Street, NW, Suite 600, Table 9 Table 1 Table 13 Table 4 Table 5 Table 7 Chart 3 Chart 1 Chart 8 Table 11 Table 12 United States, 1985–1998 .......................................... 6 The Evolution of Retirement: If you scored 0–5, you need to get started. But you are not alone; 10 percent of American workers fall into this EMPLOYEE Could You S Impaact of S ve $20 per Week More for Retirement? aving $20 per Week Workers’ Expected Social Security Age Comparison of Average Earners’ Annual Real Benefits for Various Social Security Reform Washington, DC 20037-1896. Copyright 1999 by Employee Benefit Research Institute. All rights reserved, No. 216. Workers’ Confidence in Their Overall Retirement Number of Workers Ages 18 and Over and Social Expected and Actual Most Important Source of Retirement Income Savers vs. Nonsavers, Among Individual W Median Amounts Workers Have Accumulated orkers, 1994–1999 Amount Accumulated for Retirement Workers’ Most Important Expected Source of Retirement Income, by Race Households That Are Saving for Retirement, Retirement Pl by Gender anning Personality Types Workers’ Retirement Confidence Worker Confidence in Ha Estimated Total Retirement Assets in the United States, 1985-1998 ving Enough Money to Live Comfortably in Retirement Table of Retirement Readiness Rating by Personality Type Employer-Provided Retirement Planning a 1999 RCS Under Table 6, Comparison of Average Earners’ Annual Real writers Proposals, by Birth Cohort and Gender (1998$) Income Prospects, Among Americans by Current Age by Race Apr. BENEFIT Security Eligibility Ages, United States, 1997 group. What should you do? Choose to save, now! Only 1 percent of Americans in this group have begun to save by Workers Information Among Workers Provided Among Workers Who Have Not Saved For Retirement Current Age Among Workers Who Have Saved For Retirement 75% Benefits for Various Social Security Reform Expected Actual 3 VeryAfrican- Somewhat Hispanic- Not Too Asian- Not at All 64% 69% 70% Appendix III Private 73% Private Assets Held Federal State and Local Total (Not Total RESEARCH R Score 77% Planners Savers Strugglers Impulsives Deniers 63% Information for retirement, but one-half say that they could save $20 per week for retirement. That’s over $1,000 per year, 62% 3 Deniers 61% 70% $600,000 The 1999 Retirement Confidence Survey (RCS) was Year of Birth (percentage of workers) Total Ages 25–39 American American (percentage of retirees) b $20,588 American Confidence That: Current Social Security Confident Confident $506,300 Confident Confident Contents 80% All Done Needs Not Done Needs What Is Your R —Retirement Readiness Rating? Trusteed Trusteed Don't Know by Life Government Proposals, by Birth Cohort and Gender Government Don't Know Including IRA (Including ..................... 8 May 5% Annual Real Rate of Return Total Age <60 Age 60–64 Age 65 Age 66+ 100% 100% 13% INSTITUTE Results of the 1999 Retirement ® The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is All Respondents Ages 40–49 45,238 Birth Year Age Number Percentage Eligibility Age b b which could really add up over time. Assuming a modest 5 percent rate of return saving $20 a week would result Workers Calculation Calculation Defined Defined underwritten by grants from the following organiza- 5%Insurance Retirement Retirement 4% IRA Plan IRA 19% Very Good (21–25) 16% 10% 2% 1% 0% 19% 21% Received Most Useful ho we ar 10% Annual Real Rate of Return e Table 7, Workers’ Retirement Confidence 24% ...................... 9 70% 22% 60% to contribute to, to encourage, and to enhance the development of sound employee benefit 24% 24% Reform Proposal Personal Savings (net) Personal Savings (net) W 1946 1956 1966 a 1976 a 4 or More Years Earlier 1986 49% a 49% Ages 50–59 1996 33% 2006 34% 19% a 18% 71,250 2016 48% 2026 You will have enough money to live comfortably throughout your retirement years? 24% 47% 20% 8% Male Respondents Savers End of 90% Benefit Contribution Companies Plan Assets 90% Plan Assets 24% Plan Assets) Assets Plan Assets) Good (16–20) 46 34 25 17 11 $500,000 25% in more than $50,000 over 25 years! For information on getting started, check out ASEC’s tions: AARP, Aid Association for Lutherans, American The Power to Choose Jun. 31% Money respondent put into a retirement plan at work 32 8 Money respondent put into a retirement plan at work programs and sound public policy through objective research and education. EBRI is the only private, nonprofit, Table 8, Retirement Readiness Rating by Workers’ Than Actual Eligibility Age 32 Ages 60 and over 21 17% 20 24% 39,286 26%30 12% 5% All (ages 18 and over) Nothing You will have enough money to take care of your basic expenses during your retirement? 12% 139,733,2575% 100.0% 19% 34 49 12 4 Adequate (11–15) 26 42 Female Respondents 39 36 21 Nonsavers 60% So you think you’re preparing well for your retirement, but are you really? Use this quiz to determine your Brochures 50% 33% 50% Planners Raising Taxes Only 80% Other personal savings, not including work-related retirement plans 17 10 Text You are doing a good job of preparing financially for your retirement? Other personal savings, not including work-related retirement plans Compensation Association, American Council of Life ($ billions) 80% 1–3 Years Earlier Than 17 25 12 51 14 16 18 8 brochure (www.asec.org or 1-800-998-7542). Less than $5,000 nonpartisan, Washington, DC-based organization committed exclusively to public policy research and education on 1138% 6 38% 14 43% Poor (6–10) 9 11 Overall Confidence 20 ...................................................... 32 36 9 3 3 36% 1960–1981 Ages 18–39 72,941,668 52.2% 67 Newsletters/Magazines 31 18 No 40% Retirement Readiness Rating (R ). Your R is an indicator of how good a job you’re actually doing in financial 35% 34% Male $400,000 50% Employer-Funded Plans Employer-Funded Plans $17,556 $18,806 $19,873 $21,956 Actual Eligibility Age Source: Employee Benefit Research Institute, American Savings Education $24,11020 20 $26,48724 42 $31,740 37% 14 43 30 $35,164 38 15 $38,445 46 45 Jul. You will have enough money to support yourself in retirement, no matter how long you live? 19 51 19 9 Confidence Sur $5,000–$9,999 10 8 13 vey economic security and employee benefit issues. EBRI’s membership includes a cross-section of pension funds, Very Poor (0–5) 2 3 31% 13 15 32 Insurance, American General Retirement Services/ 1985 $ 814 $ 417 $347 $154 $ 399 $2,130 $ 235 $2,365 1955–1959 40% Ages 40–44 18,754,607 13.4 66–67 27% Seminars 23 14 70% 33% 70% Table 9, Amount Accumulated for Retirement by Impulsives Female Social Security 11,989 12,670 13,543 14,976 Council, and Mathew Greenwald & Associates, 1999 Retirement 16,459 12 18,075 21,651 3923,998 29% 26,253 preparation for retirement. It may help you flag some action items that, up to now, you may have neglected or You will have enough money to take care of your medical expenses when you retire? Social Security Correct 12 17 22 16 43 19 4 25 16 8 18 13 24 $10,000–$24,999 15 12 19 Overview .......................................................................... 30% 3 businesses, trade associations, labor unions, health care providers and insurers, government organizations, and 1943–1954 1986 Ages 45–56 885 32,919,234 478 23.6 410 66 186 Telephone Access to a Financial Planner 477 2,436 319 132,755 8 40% VALIC, Aon Consulting, AT&T, Barclays Global 15% 36% Reducing Benefits Only Employment Employment 26% Later Than Actual Eligibility Age Workers Confidence Survey. 11..................................................................... 11 95644 16 3 10 Very12 10 If you scored 6–10, you have work to do. Nineteen percent of American workers fall into this group with you. 43% $25,000–$49,999 13 12 16 overlooked. And if you have, it provides some resources to point you in the right direction and help you get 30% Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Aug. (chart 1) 1987 60% $300,000 service firms. 883 45% 523 459 219 60% 524 2,608 390 2,997 1938–1942 Ages 57–61 7,343,436 5.3 65–66 Workbooks/Worksheets 13 5 55% $188,200 42% 47% Male Sale of Home or Business 16,215 14,762 14,244 15,718 17,252 5 18,928 44% 22,647 225,055 27,381 Sale of Home or Business No Don’t Know 5 4 19 21 4 15 11 20 13 $50,000–$99,999 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 Retire 16 21 Investors, CIGNA Corporation, Ernst & Young, LLP, 11 47% ment Confidence Somewhat 30% 52% Associates, 1999 Retirement Confidence Survey. Table 10, Median Amounts Workers Have Accumulated 1937 and Earlier started! 1988 Ages 62 and over 883 7,774,312 549 5.6 516 65 262 One-on-One Counseling 609 43% 2,819 451 123,271 8 There’s a 50/50 chance you have begun to save. If not, choose to save! Sixty-one percent of non-savers in this Changes in Retirement ................................................... 4 by Pamela Ostuw Female Other Government Programs 38%11,074 , Bill Pier 10,069 r9,703 on, and Paul Y 10,719 11,775 akoboski, EBRI 1 12,924 15,453 417,099 18,694 Survey. Other Government Programs 1442 $100,000 or More 50% 23 36 8 20% 50% Not Too Fidelity Institutional Retirement Services Co., John 1989 983 673 572 289 Telephone Access to Financial Information 767 3,284 $131,900 546 93,830 2 b by Current Age .......................................................... 46% 10 Source: Employee Benefit Research Institute, American Savings Education Council, Sep. 20% Raising Taxes/NRA Support From Children/Family <1 <1 5 2 group say they could put away $20 per week. Assuming a modest 5 percent rate of return saving $20 a week $200,000 7% Social Security Retirement Age Median $29,514 $66,532 ................................. $14,054 4 Yes 6 Not At All 1990 948 690 EBRI’s work advances knowledge and understanding of employee benefits and their 636 326 5% 920 3,520 634 4,155 have resulted in higher participation and higher contri- planning and savings. Still, a majority of minority confident they will have enough money to take care of Source: Employee Benefit Research Institute tabulations of data from the ing how much they will need to save and accumulate to money they put into a retirement plan at work will be a nonresponse, the effects of question wording and ques- sufficient to allow them to maintain the same level of deferral limits for Sec. 401(k), 403(b), 457, SIMPLE Computer Software/On-Line Services/Internet 6 2 Sec. 402(g) and 457 limits would be raised to $15,000 Hancock Mutual Life Insurance, Lucent Technologies, current financial responsibilities. Fifty-one percent say and Mathew Greenwald & Associates, 1999 Retirement Confidence Survey. deterministic (static) predictions of the future. savings and investment on an individual basis and to 3% The additional good news is the evidence that Social Security and Medicare Male 40% Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 16,906 17,516 RCS Cur 18,948 rent 20,300 40% 21,620 23,012 26,690 28,682 30,886 Answer each question (truthfully!) and enter the points earned (indicated in parentheses) on the line provided. Table 11, Employer-Provided Retirement Planning 10% 57% hat we do $65,500 $72,600 (table 1, table 2) 10% March 1998 Current Population Survey. 1991 W 1,120 843 678 366 1,032 Videos 4,039 774 34,812 1 would result in more than $50,000 over 25 years! For information on getting started, check out ASEC’s importance to the nation’s economy among policymakers, the news media and the public. The Power basic expenses during their retirement. Similarly, bution levels, and have influenced employee asset employees say they have not received these materials fund their retirement. The bad news is that 30 percent of major source of income, and 31 percent report it will be a Female Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 Retirement Confidence Survey. 11,542 11,948 12,913 13,848tion order, and screening. While attempts are made to consumption during retirement as they have during plans, and IRAs by 10 percent per year for each year 14,712 15,707 18,207 19,568 21,082 $36,100 this is a major reason that they are not saving. Thirty- education can have a real impact on behavior at the While the model has been used to evaluate most 26% in $1,000 increments, then indexed for inflation in Source: Employee Benefit Research Institute, American Savings Education ManuLife Financial, MetLife Insurance Company, enhance retirement plan participation and contributions. Oct. • Strugglers (20 percent of Americans) share many of Information Among Workers Provided For the second that they will have enough money to take care of medical confirms respondents’ self evaluations. Although those 1992 1,123 922 695 411 1,168 4,319 864 5,183 $100,000 $18,200 Methodology Legislative 30% $13,700 • The ninth annual Retirement Confidence Survey (RCS) shows continued evidence 30% Work and Retirement It does this by conducting and publishing policy research, analysis, and special reports on employee benefits issues; ...................................................... 4 23% 0% 0% Retirement Confidence Survey. 17% 13 to Choose Workers are increasingly confident that Social Security Council, and Mathew Greenwald & Associates, 1999 Retirement brochure (www.asec.org or 1-800-998-7542). Once you’re saving (or if you already are), get a plan. Only 26 percent of African-Americans are not confident. allocation decisions. (table 14). minor source. Further, the availability of a retirement Americans have not begun to save for their retirement six percent of African-Americans also say a major reason minimize these factors, it is difficult or impossible to their working years. individual level. More than 4-in-10 of all workers report from 2001–2005, reaching a maximum of 50 percent of the prominent reform proposals, in order to demon- To answer this question, a $500 increments. 1. Have you (or your spouse) personally saved any money for retirement? Do not include Social Security taxes or 1993 1,232 1,043 National Council of La Raza, Nationwide Life Insur- 739 465 1,256 Source: Employee Benefit Research Institute, American Savings Education 4,735 21% 19% 993 Yes 5,728 Information 17% ................................................................ year, as part of 15 who are very confident about having enough money for the attitudes of planners and savers. They are disci- expenses in retirement, and when asked specifically 1994 Saver 1995 Personally Saved Onl 1996 y Spouse/P 1997 artner Saved Only 1998 Both Saved 1999 Source: EBRI-SSASIM2 Policy Simulation Model. holding educational briefings for EBRI members, congressional and federal agency staff, and the news media; and (table 3) of progress in the drive for retirement income security for American workers. Confidence Survey. 20% 20% 20% Proposals and Medicare will continue to provide benefits of equal Appendix II 20% 69% Nov. 13 percent of this group has tried to figure out how much they need to save. Take 10 minutes to do the 1994 1,188 18% 1,063 782 17% 494 1,294 Council, and Mathew Greenwald & Associates, 1999 Retirement Confidence 4,821 1,079 5,901 Ballpark Thirty-seven percent of Hispanic-Americans respond a education front. As more Americans receive their microsimulation model was developed that calculates more than the dollar limit. Nondiscrimination rules Social • “Top-heavy” rules would be modified. Only employees plan at work is credited by almost one-half of savers with and 51 percent have never tried to determine how much employer-provided money. Saving could include money you put into a plan at work, such as a 401(k). ance Co., Principal Financial Group, Prudential they are not saving is that they have other savings goals, quantify the errors that may result from them. receiving educational materials or attending seminars strate its capabilities this discussion is limited to three Capital Gains Provisions: Appendix I The ninth Social Strugglers Values are the average over 1,000 scenarios. sponsoring public opinion surveys on employee benefit issues. Table 12, Retirement Readiness Rating by EBRI’s Education and Research Fund the Retirement (EBRI-ERF) retirement are more likely than others to score highly, plined savers (65 percent) who tend to research and $0 about long-term care in the 1998 RCS, 52 percent of 17% Retirement Income Sources ............................................ However, there are still hurdles to overcome. The RCS tracks Americans’ retirement 5 1995 1,364 1,234 n/a 537 1,518 4,652 1,352 6,004 Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Retirement Survey. Confidence Surveys, 1994–1999. EB b RI value to those provided today. In 1999, 30 percent of 20% Forty percent of today’s retirees who left the work force Normal retirement age. 10 Years 16% 20 Years been flat since 1985 (and have actually increased over 30 Years 40 Years that they are not confident they will have enough money giving them a lot of motivation to save (48 percent), and they need to save. Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 Retire An analysis of Yes (4) No (0) Security Statement how much baby boom households with varying charac- would not apply to these contributions. The RCS is co-sponsored by the Employee from the Social Security Administra- ment Confidence Survey. 16% _____ points Estimate worksheet (www.asec.org or 1-800-998-7542) and establish a savings goal! 10% performs the charitable, educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization 3 14% such as buying a house or saving for a child’s education. about retirement planning and saving in the past year generic reforms that would provide financial stability to earning more than $150,000 per year would qualify as Investments, SBC Communications, Society for Human annual Retire- 10%• The rates on adjusted net capital gains would be Minorities 13% Motivators to Save for Retir plan for large purchases (84 percent). Cautious in ement Personality Type ....................................................... 12% Confidence 17 workers were not confident that they would have enough 12% only 26 percent score in the 21 to 25 R 1996 1,532 1,384 range. Therefore, 871 581 1,715 6,083 1,578 8% 7,661 for retirement. Close to one-half of African-American and 8% Security As public retire. Fifty-four percent of Asian-Americans, 61 percent Changes in (table 4, table 5) planning and saving behavior and their confidence regarding various aspects of their 7% 8% Dec. 4% earlier than expected say they did so because of health respondents say they are very or somewhat confident the past several years). For example, the labor force Savers supported by contributions and grants. for basic expenses in retirement. (Sixteen percent of all the lack of a plan is cited by 31 percent of nonsavers as a Source: Employee Benefit Research Institute calculations. 1997 Employers play a major role in ensuring ad- 1,821 1,634 the workers and 896 595 tion, this particular knowledge gap should narrow. There • In addition, 33 percent of African-Americans say the fact Benefit Research Institute (EBRI), a private, nonprofit, teristics need to save throughout their adult lives to The 100 percent of compensation limit would be from their employer (42 percent). Four-in-10 of those the Social Security program. These three generic reforms 2,094 7,040 1,948 8,988 “key employees,” regardless of their status as officers Resource Management, TIAA-CREF, T. Rowe Price, ment Confi- reduced to 18 percent from 20 percent, and 8 percent Table 13, Workers’ Most Important Expected Source Survey (RCS), their retirement (74 percent), and 70 percent are saving many of the workers who their behavior, they consider themselves to be savers 0% say they are confident about money to pay for long-term care, such as nursing home EMPLOYEE Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & 0% Social Security and Medicare.......................................... interest in 7 Hispanic-American households have begun saving for Personality retirement. It also categorizes workers and retirees into distinct groups based on of Hispanic-Americans, and 62 percent of African- 18% 2. Have you (or your spouse) tried to figure out how much money you will need to have saved by the time you Retirement 14 African-Americans problems or disability. Other reasons cited for retiring that Social Security will continue to provide benefits of 1998 —The top reason African-Americans 2,215 1,845 896 595 participation rate for 65-year-old males was 71.7 percent 2,094 7,645 1,948 9,594 1993 1994 1995 1996 1997 1998 1999 workers are not confident.) Total African- Hispanic- Asian- Savings major reason they do not save. of a company, and the four-year look-back rule for equate retirement preparation. Most obviously, 4-in-10 of Associates, 1999 Retirement Confidence Survey. and The Vanguard Group. retirees in the are also implications for public involvement in the Social that they expect to have a pension is a major reason they nonpartisan public policy research organization; the accumulate enough for retirement at age 65. who received some sort of educational materials from clarified, to stipulate that it does not apply to contain what are called “traditional” reforms: increasing 1995. Furthermore, the survey finds that 60 percent of from 10 percent for taxpayers in the lowest marginal dence Survey (RCS) gauges the views and attitudes of of Retirement Income, by Race ................................. 19 additional for retirement, the amounts accumulated by workers as If you scored having enough money for retirement appear to be falsely rather than investors (94 percent). But the fact that 11–15, you’ve taken the first big step. Now take the second! Thirty-two percent of American workers or home health care, should they need it in retirement. 1999 retirement (table 14). planning and saving for retirement has grown, some (table 6) Americans think they will work for pay in retirement. their individual views on retirement, retirement planning, and saving. retire so that you can live comfortably in retirement? American American American normal retirement age would increase from age 65 for consumption in retirement. The study also assumed a having enough money to support themselves in retire- Retirement BENEFIT ers and females workers report similar levels of those equal value, compared with just 20 percent in 1996. began saving for retirement is they feel they cannot earlier than planned are changes at the work place such in 1950. It fell steadily over time to 30.5 percent in 1985, all workers report that they expect money provided by Forty-five percent of Hispanic-Americans say Forty-two percent of workers report receiving 1999 RCS Security reform debate, as most individuals are unaware prescriptions generated by the model were then com- American Savings Education Council (ASEC), a partner- multiemployer plans. Age have not begun to save for retirement. their employer say it caused them to begin (19 percent) taxes, reducing benefits, and/or increasing the retire- working and retired Americans regarding retirement, determining key employee status would be eliminated. EBRI Issue Briefs Table 14, Workers’ Retirement Preparations and employers say they plan to increase financial education are monthly periodicals providing expert evaluations of bracket. they are frequently set back from their financial goals th respondents in three minority groups (African-Ameri- Source: Employee Benefit Research Institute, American Savings Source: Employee Benefit Research Institute. Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Retirement Increased life expectancy and the aging of the baby boom Confidence Survey, a whole are generally unimpressive. On average, how- Retirement Confidence are in this group, and 87 percent of them have begun to save for their retirement. However, less than one-half confident (table 8). This is another area with no notable .................................................... 8 members of the 106 Congress have proposed broaden- About two-thirds of all workers surveyed by the RCS Yes (3) No (0) _____ points those who reach 62 in 1999 by two months each year goal of maintaining a steady level of consumption after Chart 4ment no matter how long they live, and about having Types ur publications personally saving for retirement and among households count on Social Security. Sixty-two percent say this gave as downsizing or closure (14 percent), family reasons Likewise, in 1999, 33 percent say they are very or a and rose to 32.4 percent in 1997. Older female labor allocated to equity funds varies widely around the 1993–1999. enough money to take care of basic expenses is at least they are not confident that they will have enough money employee benefit issues and trends, as well as critical analyses of employee Education Council, and Mathew Greenwald & Associates, 1999 educational materials or seminars about retirement their employer to be a major source of income in retire- RESEARCH 1998 data on Assets Held by Life Insurance Companies, Federal Retirement Plan Assets, State and Local Government Retirement Pla O reveals five of changes that have already been made to improve the • pared with actual savings deduced from a survey of baby ship of more than 250 private- and public-sector Portability among different types of plans and rollover or resume (21 percent) saving for retirement, while ment age. for retirement saving, with 20 percent of these saying Not Too n Assets, and IRA Plan Confident their preparations for retirement, their confidence with In addition, the bill would allow matching contribu- Planning, by Race • Certain capital assets would be indexed to inflation, Very Confident ..................................................... 19 cans, Hispanic-Americans, and Asian-Americans) were ever, those who have done a needs calculation have differences based on gender or generation. by unexpected events (69 percent) makes them much generation will bring rapid growth in the number of (table 7, table 8, table 9, table 10) Motivational Factors Among Retirement Savers (Current Workers) have tried to figure out how much they need to save. Take 10 minutes to do the ing access to individual savings and retirement plans Ballpark Estimate worksheet Household Savings Needs Calculation • The retirement envisioned by today’s workers looks different in many respects from —Many African- indicate they expect to work for pay in retirement until it reaches age 67 for those who attain age 62 in Retirement Confidence Survey. Many of today’s workers will not be eligible to receive Among those not saving for retirement, 78 percent of retirement. However, it is not clear that the same level of assets are set to their 1997 levels because the 1998 data are not available. benefit policies and proposals. Each issue, ranging in length from 16–28 pages, thoroughly explores one topic. enough money for medical expenses. Most of those who $4,800, and among those in early retirement years saving for retirement. There are no generational differ- EBRI them a lot of motivation to begin saving. Seeing people (14 percent), and other work-related reasons (12 per- somewhat confident that Medicare will continue to participation rates were relatively steady over time until as good as expected (44 percent better than expected, Not At All Confident to support themselves in retirement, no matter how long average of 44 percent for all participants. A total of distinct groups system’s financial situation. boom households. The general conclusion, summarized in IRAs would be eased by standardizing the tax treat- Somewhat Confident planning and saving in the past year from their em- ment (40 percent), and the same proportion say it will be tions to count toward satisfying the top-heavy Hispanic-Americans institutions dedicated to raising the public awareness of similar proportions say they changed the amount they they plan to increase their education efforts significantly. generally reducing the amount subject to capital gains The first generic reform, “raising taxes only,” —The most common reason cited by regard to various aspects of retirement, and related 3. Do you have an investing or savings program for your retirement? surveyed for the RCS Minority Survey. Results of the saved considerably more than those who have not done less confident about their retirement prospects. b Several indicators provide evidence supporting people at risk of needing long-term care. According to Saving for Retirement ................................................... 11 American and Asian-American households have tried to and enhancing them in ways that will allow greater tax- INSTITUTE 8 (68 percent) (table 14). Individual retirement account. ® that now experienced by current retirees. Today’s workers expect to work longer (www.asec.org or 1-800-998-7542) and establish a savings goal! As Yogi Berra once said, “If you don’t know where Notes is a monthly periodical providing current information on a variety of employee benefit topics. EBRI’s Washington 2011. consumption in older age will be necessary to maintain The retirement age is then indexed to longevity are confident are somewhat confident rather than very full benefits from Social Security until they are age 67 workers in Generation X, 58 percent of younger boomers, (household head ages 65–74) the figure was $12,500. ences among workers, either. provide benefits of equal value, compared with 23 per- who did not prepare for retirement and, therefore, have 31 percent of the participants held no equity funds at all, cent). Only a small proportion say they did so because 37 percent same as expected), while a slightly smaller the mid-1980s, and have increased significantly since they live. Thirty percent of African-Americans, 24 per- of Americans (chart 8) who have very different attitudes a minor source (41 percent). Even more important, ployer. One-half of those who received employer-provided a “baby boomer retirement index,” was that baby what is needed to ensure long-term personal financial ment of preretirement distributions. Hispanic-Americans for not saving is also that they have were contributing to a retirement savings plan (40 per- would raise payroll taxes enough to fully fund current- issues. The survey was conducted within the United minimums, family attribution would be repealed, and Yes (2) No (0) Finally, the survey notes that 401(k) participation rates taxes. _____ points Although three-fourths believe they will have enough survey show many similarities among individuals in (chart 2, chart 3, chart 4, chart 5, chart 6) data from the Health Insurance Association of America the calculation. The median amount accumulated by the fact that many workers may be falsely confident. 100% Charts figure out how much money they will need to have saved advantaged savings. Congressional proposals aimed at Bulletin provides sponsors with short, timely updates on major federal developments in employee benefits. 16 For many, the reason they expect to be working EBRI’s than current retirees actually worked before retiring—and many say they plan to you’re going, you will end up somewhere else.” thereafter. the same standard of living when younger. confident—that is, they should have enough money if (table 1), but few respondents are aware that the Social 24, 25 Several different factors motivate people to save 18% struggled in retirement gave 59 percent of African- they found they could afford an early retirement (14 per- 50 percent of older boomers, and 39 percent of pre- cent in 1996. Still, at least two-thirds of current workers then. Median net worth among all U.S. families was while 7 percent had less than 20 percent allocated to proportion say their experience in having enough money cent of Asian-Americans, and 28 percent of all workers toward their finances and planning for retirement. however, 46 percent expect that money they put into a materials say they received brochures (50 percent), and • boomers are saving at only one-third the rate necessary too many current financial responsibilities: 56 percent independence, and a part of the EBRI Education and Vesting schedules for employer contributions to 401(k) cent) or changed the allocation of their money in a law benefits. This involves gradually raising the Old-Age are 71 percent when seminars are offered versus 54 per- States between Jan. 4 and Feb. 28, 1999, through the Sec. 401(k) safe harbor would be deemed to satisfy 17% Work and Retir these minority groups, but there are also differences ement workers who have tried to figure out how much money Even though the proportion of workers who have tried to Investing for Retirement money for basic expenses (77 percent), only 59 percent Fundamentals of Employee Benefit Programs .......................................... 13 offers a straightforward, basic explanation of employee benefit programs Source: Employee Benefit Research Institute, American Savings Education Council, 24% (HIAA), as of year-end 1996, 120 companies had sold 18% annuities, and other retirement plans accounted for (60 percent) are more likely than pre-boomers (33 per- enhancing retirement plans can generally be divided into 90% 21% by the time they retire so that they can live comfortably work for pay after they retire. in retirement is because they enjoy work and want to The ninth sources of income in retirement. Current retirees are Table 6 compares the benefits for average wage Security normal retirement age is being phased up, from boomers report that they could save $20 per week for 4. Have you thought about insurance coverage for long-term care or nursing home needs? Gale produces his own estimates of the propor- everything goes just right (table 7). There are no differ- $35,459 in 1995 (not counting home equity, the figure is for retirement (chart 4). Major motivators cited by more Americans a lot of motivation to begin saving for cent). are not confident that each of these programs will Furthermore, many older Americans leave the to cover medical expenses is at least as good as expected As shown by their scores on the feel the same. equity funds. At the other extreme, 25 percent of the Retirement Readiness Chart 1, Worker Confidence in Having Enough Money and Mathew Greenwald & Associates, 1999 Retirement Confidence Survey. to maintain their level of consumption in retirement. (80 percent), and most enjoy financial planning plans would be accelerated to three from five years for another third received newsletters or magazines retirement plan at work will be a major source of income, the top-heavy rules. Small employers are most say this is a major reason. Other savings goals, such as a Research Fund; and Mathew Greenwald & Associates, retirement savings plan (41 percent). In addition, those and Survivors Insurance (OASI) tax rate from 10.6 per- cent when seminars are not offered. IRA Provisions: 20-minute telephone interviews with 1,002 individuals in the private and public sectors. The EBRI Databook on Employee Benefits is a statistical reference volume on employee Today’s Retirees are confident they will have enough money to live ............................................................. 14 among the groups. Retirement confidence, investment they will need in retirement is $66,532, compared with a determine how much they need to save by the time they nearly 5 million long-term care insurance policies, and cent) and older boomers (46 percent) to expect that 19.5 percent of the elderly’s income, while income from in retirement. However, many still have not attempted to two categories: 1) raising the amounts that can be 49% 39% stay involved. This is a major reason for 62 percent of 80% 53% most likely to identify Social Security as their most earners across these three reform proposals (the model tion of married households, with the husband working, annual Retire- Yes (2) No (0) ences in confidence by gender. _____ points age 65 to 67. A majority (59 percent) expect to reach full retirement. 48% $10,005). For those nearing retirement, median net than 1-in-5 workers are: 7 continue to provide benefits equivalent to those received 48% If you scored retirement. Forty-nine percent say they realized time participants had over 80 percent of the plan balances While only 29 percent of retirees say they have 16–20 benefit programs and work force related issues. , you’re off to a good start. Thirty-one percent of working Americans are in this group—99 per- Nearly one-half of today’s workers expect to retire at age (40 per-cent better than expected, 35 percent same as labor force gradually, utilizing “bridge jobs” between Rating (31 percent) (table 11). Forty percent of those who and 3-in-10 report it will be a minor source (31 percent). , Planners appear to be the best prepared for Inc. (MGA), a Washington, DC-based market research (67 percent). But they are more cautious than plan- to Live Comfortably in Retirement “cliff” or 100 percent vesting, and to six from seven William G. Gale (1997) argues that this index ............................ 3 house or child’s education, are a major reason for 37 per- who reported receiving employer-provided materials are cent in the year 2000 to 16.4 percent in the year 2060. (751 workers and 251 retirees) ages 25 and older. strongly impacted by the “top-heavy” rules. • The annual IRA contribution limit (for both conven- A recent report by William M. Mercer concluded The Role of the Employer comfortably throughout retirement. .............................................. 14 confidence, expected sources of income in retirement, the market had grown an average of 22 percent between assets accounted for 20.2 percent of total income. Earn- median of $14,054 accumulated by workers who have not retire has increased steadily since 1996, only one-half of personal savings will be their most important source of do the calculation (table 14). contributed, and 2) easing the regulatory and adminis- African-Americans, 66 percent of Asian-Americans, and • Twenty-four percent of workers reported that they are very confident they will have 70% ment 1999 RCS Minority Sur important source of income, but current workers are vey can also be used to model privatization proposals that who are “on track” toward accumulating enough wealth Should workers be as confident about their eligibility sooner than they actually will. Many of these • Feeling they could not count on Social Security was running out to prepare and this gave them a lot of worked for pay since they retired, an increasing propor- today (69 percent are not confident in Social Security Among workers who are saving for retirement, 65 or later, and 5 percent expect they will never retire. worth was $86,478 ($19,873 without housing wealth). employment on a full-time career job and complete labor invested in equity funds. The remaining 38 percent had expected). However, while a majority of retirees have Investment Confidence cent have begun to save and 88 percent have tried to figure out how much they —Among individuals saving for Chart 2, Savers vs. Nonsavers, Among Individual need 43% to save. But are you on retirement, followed by Savers, Strugglers, Impulsives, Further, the availability of a retirement plan at work is received some sort of educational materials from their reveals little about the overall adequacy of retirement cent of Hispanic-Americans who are not saving for firm. ners—almost all pay off their credit cards at the end years for gradual vesting. more likely than others to have also reported doing a that communication to employees on savings plans has “Reducing benefits only,” the second generic reform, is tional and Roth IRAs) would increase to $3,000 in 10 • Random digit dialing was used to obtain a representative Minimum distribution rules would be modified. (table 11, chart 7) retirement preparations and planning, savings motiva- 38% done the calculation. The median amount accumulated all current workers have actually tried to do this calcula- 1987 and 1996. These insurance policies include ings accounted for 16.6 percent of the elderly’s income in 5. How confident are you (and your spouse) about the following issues related to retirement? Would you say that retirement income. Pre-boomers are more likely than 37% trative hurdles faced by plan sponsors and participants. 17 9 51% enough money to live comfortably in retirement, and 45 percent reported that they 67 percent of Hispanic-Americans. Another major reason Confidence 38% most likely to say that they expect personal savings to be 3 involve individual accounts 60% ). For the 1946 birth cohort, workers incorrectly expect to be eligible for full benefits male workers are more likely than female workers to say for retirement. Overview Gale finds that when housing equity is retirement as they are? The For families in the early retirement years, median net (53 percent). Retirement Readiness motivation to begin saving for retirement. tion of workers indicate they expect to work for pay in and 66 percent are not confident in the Medicare pro- UnderIn contrast to these expectations, however, most current writers force withdrawal. Such bridge jobs are often part time, 23 found that the financial aspects of their retirement met Workers, 1994–1999 ................................................. 11 retirement, there are no statistically significant differ- and Deniers. Sixteen percent of Planners and 10 percent allocations in equity funds ranging between 20 percent employer say it caused them to begin (19 percent) or credited by almost one-half of savers with giving them a • preparations, since it does not measure the adequacy of of every month (95 percent)—and their caution leads A flat Pension Benefit Guaranty Corporation pre- The 1999 RCS data collection was funded by • Plan loans would be allowed for subchapter S corpora- retirement. For 29 percent of Hispanic-Americans, a percent of African-Americans expect this to be their most retirement savings needs calculation. become increasingly sophisticated. just the opposite of raising taxes: Benefits would be 2000–2003, $4,000 in 2004–2005, and rise again to Most plans sur- cross-section of the U.S. population, and interview Personality Types target? Seventy-six percent say they could save another $20 per week for retirement. So if you are not on target, .......................................................... 16Contact EBRI Publications, (202) 659-0670; fax publication orders to • Impulsives (15 percent of all Americans) think that tors, and reasons for not saving are among the topics for retirement by all workers is $29,514 (table 9). tion (49 percent in 1999, compared with 32 percent in you are very confident, somewhat confident, not too confident, or individual, group association, employer-sponsored, and not at all confident… 1 workers in the other generation groups to expect Social 1997. $20 Per Week The three primary pension-related legislative —Savers were asked if they thought it many individuals expect to work for pay after retiring is 3 are somewhat confident. However, there are indications that many may be falsely their most important source of income in retirement. benefit levels are essentially the same under the three not counted, 47 percent of all households (48 percent of ubscriptions/orders Survey (RCS) Rating (or R ) is designed to indicate how well individual at age 65 (37 percent of all workers), but some believe they could save an additional $20 per week for retire- 50% worth was $97,474 ($26,004 without home equity). • Starting to earn enough money to be able to save gram). S and 80 percent. The percentage of those holding no retirement (68 percent, up from 61 percent in 1998). retirees report actual retirement ages younger than age Chart 3, Households That Are Saving for Retirement, or exceeded their expectations, 1-in-5 retirees is living a often in a new line of work, and sometimes involve a ences among minority groups in confidence levels about of Savers appear to be doing a very good job of preparing resume (21 percent) saving for retirement, while similar lot of motivation to save (48 percent), and the lack of a(202) 775-6312. Subscriptions to saving by the ratio of total retirement resources (Social grants from 24 organizations, and the minority to risk-adverse investment behavior. One-half are not mium of $5 per participant would be available to EBRI Issue Briefs are included as part of major reason they have not begun saving for retirement important source of income in retirement. Social Security reduced gradually to allow current-law taxes to fully While calls for “more and better education” may quotas were established by sex of respondent to reflect tion shareholders, partners, and sole proprietors, (chart 8, table 12) veyed are now making use of company newsletters and $5,000 in 2006–2007. It would drop back to $2,000 per put a little more away. In addition, 25 percent of this group is only anyone can have a comfortable retirement if he or she a. …that you are doing a good job of preparing financially for your retirement? th covered in the survey. somewhat confident that they are investing riders to life insurance policies that accelerate the death 1996). Those expecting to retire before age 59 or between The fact that only 39 percent of retirees in the While the median amount saved increases by Security to be their most important source of income in would be reasonably possible for them to save $20 more vehicles introduced in the 106 Congress were: to keep their health insurance or other benefits (49 per- confident. The 1999 RCS Minority Survey was underwritten by 39% shows continued For the past three years, approximately one- reform plans because most of the changes in these baby boomer households) were saving adequately as of workers are preparing for retirement. The scale runs they will be eligible even before age 65 (22 percent of all 3 (49 percent). Hispanic-Americans Both workers and retirees are most likely to identify ment (75 percent versus 63 percent). Among savers, 40%While workers’ confidence in the Social Security EBRI membership, or as part of a $199 annual subscription to —Among Hispanic-American savers, 65 (table 3). Therefore, even seemingly small amounts of money switch from wage and salary work to self-employment. EBRI Notes and EBRI Issue Briefs. Individual copies are equity funds varies with age, but remains significant retirement that is in some sense financially disappoint- by Gender .................................................................. 12 investing retirement savings wisely. Forty-seven percent Minorities for retirement (a R plan is cited by 3-in-10 nonsavers as a major reason they through a modification of the prohibited transaction proportions say they changed the amount they were ....................................................................... score of 21 to 25). This compares 17 Security, pensions, and other assets) to total retirement is they feel they have lots of time until their retirement. oversamples were funded by grants from nine organiza- is also frequently mentioned as an expected source, with willing to take any financial risks, no matter what the seem mundane and trite to some, if retirement income small employers (those with 100 or few employees) fund the new lower benefits. This reform would gradu- benefit brochures, fund prospectuses, and personalized year in 2008 and thereafter. the actual proportions in the population. Very confident (2) Somewhat confident (1) 33% Not too/not at all confident (0) _____ points age (ages 25–39, $20,588; ages 40–49, $45,238; ages the ages of 60 and 64 are more likely than those plan- just plans and saves (86 percent), but few consider benefit for long-term care. Eighty percent of the long- RCS reported Social Security as their most important their retirement savings wisely. If that’s you, take the time to learn some more about investing. It may help you 36% retirement. Twenty-four percent of pre-boomers, 12 per- • H.R. 1120, the Comprehensive Retirement Security per week than they are currently saving for retirement. grants from the following organizations: cent of African-Americans, 50 percent of Asian- evidence of progress in the drive for retirement income 34% 43% fourth of American workers have reported they are very reforms (such as phased-in tax increases and benefit available with prepayment for $25 each (for printed copies) or for $7.50 (as an e-mailed electronic file) by calling workers). Nineteen percent of workers say they do not 78 percent of workers in Generation X, 69 percent of 1992. If all housing equity is counted, the fraction of from 0 to 25, with those scoring 25 apparently doing the saved over long periods of time can produce a nest egg • Having seen people not prepare and, therefore, 55 percent say seeing people not prepare for retirement © 1999. enjoying work and wanting to stay involved as a major and Medicare programs has been increasing in recent Estimates suggest that between one-third and one-half of For many retirees, this earlier retirement was 30% Chart 4, Motivational Factors Among Retirement ing. Although women are likely to live longer than men, with 2 percent of Strugglers, 1 percent of Impulsives, of Hispanic-Americans who are saving for retirement are across age groups. Of those participants in their 60s, contributing to a retirement savings plan (40 percent) or do not save (31 percent). needs (the wealth necessary on the eve of retirement to tions. Staffing was donated by EBRI, ASEC, and MGA. gain (51 percent) and they characterize themselves as that establish defined benefit plans. rules. Subchapter S status, which allows a corporation Retirement Confidence ............................................. 17 22 percent expecting this to be most important (table 13). security is viewed as a long-term challenge, education • ally reduce benefits until they are approximately statements with illustrations or individual projections of The adjusted gross income limit for Roth IRA conver- In addition to the 1,002 Americans in the base themselves to be disciplined savers (34 percent). In 50–59, $71,250), workers age 60 and older have accumu- ning to retire later to say they have done this calculation. term care policies in existence as of year-end 1996 had cent of older boomers, 9 percent of younger boomers, and Retirement Confidence retirement income source is somewhat surprising, since sleep even better at night. A majority of savers in each of the minority groups and Pension Reform Act, cosponsored by Reps. Rob EBRI or from www.ebri.org. Change of Address: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037, (202) Americans, and 55 percent of Hispanic-Americans). • The good news is that 70 percent of Americans are saving for retirement, and a AARP, AT&T, CIGNA Corporation, Eli Lilly and 42% confident they will have enough money to live comfort- 40% reductions) do not affect this cohort. For later cohorts, security for American workers. However, there are still households preparing adequately increases to 70 percent best job of preparation. The factors used to compute the know when they will be eligible to receive full benefits Employee younger boomers, 63 percent of older boomers, and b. …that you will have enough money to take care of your medical expenses when you retire? that will make a real difference in retirement. struggle in retirement (48 percent). 41% 15 years, the year that each program’s trust fund is ex- and struggle in retirement gave them a lot of motivation 46 percent held no equity funds, compared with 33 per- reason for working in retirement (64 percent and 62 per- not by design—43 percent of today’s retirees say they there are no gender differences regarding standard-of- 38% Savers (Current Workers) older Americans will work on a bridge job before retiring ........................................ 12 and no Deniers scoring in the same range (table 12). extremely or very confident they are investing their changed the allocation of their money in a retirement 20%These results suggest much remains to be done, • maintain preretirement living standards). RCS materials may be accessed at the EBRI Web site: savers, not investors (93 percent). Still, they are Additional disclosure would be required involving Rather, it (chart 9) Asian-Americans must be the central focus of public policy efforts. 28 percent lower than under current law. —The top three reasons Asian-Ameri- survey sample, African-Americans, Hispanic-Americans, to be taxed like a partnership while maintaining a investment growth to inform employees of their alterna- sions would rise to $200,000 for married filers and fact, they are frequently set back from their financial 31% 775-9132; fax number, (202) 775-6312; e-mail: Publications Subscriptions@ebri.org. been sold through the individual and group association Membership Information: Inquir- it accounted for 87 percent of income for the bottom two lated less ($39,286 median amount saved)—perhaps Curiously, however, those who have done the calculation 5 percent of Generation X workers expect Social Security indicate that they could. In addition, more than one-half Portman (R-OH) and Ben Cardin (D-MD). Fifty-four percent of African-Americans think that a growing percentage (49 percent) are going further and determining how much they Company, National Council of La Raza, Nationwide hurdles to overcome. The RCS tracks Americans’ retire- ably in retirement (24 percent in 1999), and the “raising taxes only” reform provides the highest level (71 percent for baby boomer households). (The author Benefit Very confident (2) Somewhat confident (1) score for each worker include saving for retirement, Not too/not at all confident (0) _____ points from Social Security. Only 16 percent are able to give the • The availability of a retirement plan at work to save for retirement. This is the top motivator among cent, respectively). Yet workers, more so than retirees, pected to be depleted has continued to move further out. 63 percent of pre-boomers report that they could save an 21% retired earlier than planned. The youngest retirees— Chart 5, Could You Save $20 per Week More for completely, and for these workers retirement is best cent for those in their 50s, 30 percent for those in their living experiences among current retirees. retirement savings wisely. Among African-American and Expected Most Important Sources of Income in 18% savings plan (41 percent) (chart 7). In addition, those especially with public education. For example, 59 percent corporate structure for liability purposes, is fairly 10% Descriptions of each personality type follow: cans give for not saving for retirement are the same as Hispanic-Americans www.ebri.org/rcs. A list of underwriters can be found at examines the ratio of “other assets” to the part of total confident about their retirement. A large majority potential benefit reductions in certain retirement Overall tives. More than one-half of those not using personalized $100,000 for all other filers. The bill also would allow —Asian-Americans are the most confident that The last of the generic reforms, “raising taxes/ —Hispanic-Americans also cite and Asian-Americans were oversampled to permit ies regarding EBRI membership, and/or contributions to EBRI-ERF should be directed to EBRI President Dallas 15% because they are more likely to expect to rely on Social are only slightly more likely than those who have not to goals (90 percent), frequently spend money when they 12% markets. In the employer-sponsored market, over quintiles of those age 65 and older, 78 percent of income to be their most important retirement income source. • S. 649, the Retirement Savings Opportunity Act, 8% of workers in each minority group without any personal need to save to fund their retirement. The bad news is that 30 percent of Americans Life Insurance Co., Principal Financial Group, Pruden- major reason they will work in retirement will be to have Research ment planning and saving behavior and their confidence approximately 45 percent have reported that they are If you scored of benefits, while the “reducing benefits only” reform 21–25, you are among the few. Only 8 percent of working Americans scored at this level. You are correct age at which they will be eligible for full benefits, additional $20 per week for retirement. notes that other married couples and singles are likely to completing a savings needs calculation, establishing an (48 percent). Hispanic-American savers. Another motivator is that also say major reasons they will work in retirement are According to estimates in the latest Social Security those born in 1933 or later—are especially likely to Retirement? viewed as a process, not as a single event. ............................................................... 13 Retirees with higher incomes are more likely • Asian-American savers, 52 percent and 51 percent, 40s, 27 percent for those in their 30s, and 28 percent for who reported receiving of workers expect to be eligible for full Social Security Planners Retirement (35 percent of all Americans) believe anyone ............................................................ Salisbury at the above address, (202) 659-0670; e-mail: salisbury@ebri.org 18 the end of this need not covered by Social Security and pensions. believe they will have enough money to live comfort- plans (in particular, cash balance conversions). The Investing for Retir Issue Brief. ement common among small employers. those for Hispanic-Americans. Fifty-one percent of personal savings as their expected most important they will have enough money to live comfortably normal retirement age,” would be a combination of the those married but filing separately to convert tradi- statements expected to analysis of these minority groups. A total of 200 inter- do not plan to buy anything (51 percent), and tend to 0% Security for a major portion of their retirement income be able to provide the correct age at which they will be 650,000 policies had been sold through 1,532 employ- c. …that you will have enough money to support yourself (yourselves) in retirement, Male workers and female workers do not differ in terms for those in the middle quintile, and 54 percent of income retirement savings (nonsavers) report that it would be introduced by Sens. William Roth (R-DE) and Max money to make ends meet (41 percent for Hispanic- Institute- have not begun to save for their retirement, and 51 percent have never tried to tial Investments, and T. Rowe Price. somewhat confident (47 percent in 1999) (chart 1). provides the lowest level of benefits. regarding various aspects of their retirement. It also be faring worse.) Gale further notes that the median 20, 21 investing or savings program for retirement, and atti- and 5 percent believe they will be eligible later than they saving, you have tried to determine how much you need to save, and you are very or extremely confident that you Saving $20 per week amounts to more than Could Not • Realizing that time was running out to prepare for Trustees’ report, the amount paid out in Social Security Started Earning Have Seen Availablity of Realized Time Chart 6, Impact of Saving $20 per Week Advice From .................... 14 they felt they could not count on Social Security (49 per- those in their 20s. to keep health insurance and other benefits (37 percent (table 13) Prof report retiring before age 60 or retiring earlier than than others to say that their retirement experiences are essional Things Read respectively, are extremely or very confident. can have a comfortable retirement if he or she just employer-provided benefits sooner than they actually will be, and an ably (85 percent), will have enough money to take care bill would have required plan sponsors to notify In addition, Bernheim’s calculations discounted Family Availablity of Asian-Americans say that having too many current source of income in retirement (34 percent). Nineteen first two reforms. This is because raising the normal throughout their retirement years. Hispanic-Americans 11 • views were completed within each ethnic group (totaling Nondiscrimination rules would be modified by deem- tional IRAs to Roth IRAs. do so within one year. carry credit card debt (67 percent). Over one-half no matter how long you live? ers. for those in the fourth quintile in the CPS. This may be (table 10). To put these accumulations in perspective, eligible for full benefits from Social Security. Count on of expected sources of income in retirement. Education reasonably possible for them to save $20 per week for Baucus (D-MT). Enough People a Retirement Was Americans and 26 percent for Asian-Americans). Friends or determine how much they need to save. Financial in Newspaper categorizes workers and retirees into distinct groups When it comes to investing their retirement savings, the However, there are several reasons to believe that many Event Educational inadequate saver (ignoring all housing equity) has a tudes toward various aspects of preparing for retirement. actually will be (table 2). retirement (39 percent). cent). For 48 percent of Hispanic-American savers, the vs. 16 percent), to have money to make ends meet benefits will begin to exceed the amount collected in tax $1,000 per year, which saved over time can add up to a Chart 7, Actions Resulting From Employer-Provided expected. are investing your retirement savings wisely. Evaluate your progress periodically to make sure you stay on track. Retirement Preparations and Planning................... 18 Chart 7 better than expected, but so are those relying on money Most of the remaining savers in each of the Social Security plans and saves (90 percent). This group is composed materials are more additional 19 percent admit they do not know when they ing that a plan satisfies the rules if it meets the “facts to Save Not Prepared Plan Running Out financial responsibilities is a major reason they are not percent expect Social Security to be most important to housing wealth. This exclusion has a dramatic effect on of basic expenses (92 percent), and are doing a good participants of a “significant” reduction in future • Retir are least confident (chart 9). retirement age is essentially a benefit cut, since benefi- Additional “catch-up” contributions would be allowed ement Income Sour Family ces While only 14 percent 600 interviews) among working adults, using targeted Editorial Board: Dallas L. Salisbury, publisher; Steve Blakely, managing editor; Cindy O’Connor, production and distribution. Any Advisor /Magazine Very confident (2) Somewhat confident (1) Not too/not at all confident (0) Material _____ points assume a single male, age 65, purchases a life annuity believe that they will have enough money to live Only 36 percent of workers have thought about Finally, while three-fourths of workers say they and Research due to question wording and in particular to the use of As of year-end 1998, tax-qualified retirement • S. 741, the Pension Coverage and Portability Act, retirement (table 14). based on their individual views on retirement, retire- are falsely confident. Only one-half of all workers have majority of workers who are saving say that they are According to the significant sum of money. The power of compound shortfall of $22,000, or about six months of earnings. In general, the earlier that respondents are Actions Resulting From Employer • The advice of a financial professional (24 percent). -Pro Based on the results of this scale, 8 percent of vided Information availability of a retirement plan at work gave them a lot (37 percent vs. 26 percent), and to be able to afford revenues beginning in 2013 and the existing trust fund is views expressed in this publication and those of the authors should not be ascribed to the officers, trustees, members, or othe Information on Retirement Saving and Planning If current workers follow the pattern set by r (table 14) from an employer as their most important source of minority groups are somewhat confident they are Is there anything you might have missed? Twenty percent of this group have not thought about long-term care of disciplined savers (86 percent). They always likely than others to will be eligible. The majority of the findings; if housing wealth is taken into account, job preparing financially for their retirement (89 per- benefit accruals, and created a monetary penalty for and circumstances” test under 401(a)(4). saving for retirement. Forty-nine percent of Asian- them, and 16 percent expect full- or part-time employ- ciaries would receive a lower benefit when they retire at for individuals ages 50 and older, effective in 2001. of plan sponsors lists to supplement random digit dialing. Among His- comfortably throughout their retirement years today. insurance coverage for long-term care or nursing home Fund. With $71,250, he could purchase a nominal have established an investing or savings program for plan assets in the United States amounted to $9.6 the words “most important” in the RCS. While Social introduced by Sens. Bob Graham (D-FL), Charles Employer-Provided Education Materials—Some employ- • Employers play a major role in ensuring adequate retirement preparation. Forty sponsors of the Employee Benefit Research Institute, the EBRI Education and Research Fund, or their staffs. Nothing herein is on Retirement S 4 aving and Planning Among W even tried to determine how much they will need to save orkers to ment planning, and saving. RCS, 71 percent American workers appear to be doing a very good job of In the RCS, today’s retirees are most likely to report extremely confident (19 percent) or very confident planning to retire, the earlier they believe they will be interest allows a 25-year-old saving $20 a week, assum- Among Workers Who Were Provided Information • A family event, such as marriage, birth of a child, or .. 15 estimated to be depleted by 2034. Motivators to Save for Retirement ........................... The Medicare pro- 20 of motivation to begin to save for retirement. extras (36 percent vs. 26 percent). Workers not confident today’s retirees, many are also likely to retire earlier income. In contrast, those relying on Social Security as investing their retirement savings wisely. They think research and plan for big purchases (92 percent), have also reported A Lot of Motivation retirees say Some Motivation then the study found that baby boomers are saving at cent). failure to comply with the notice requirement. The No Motivation At All insurance. Have you? 6. How well does each of the following statements describe you? Would you say it describes you very well, well, Americans also say that saving for other goals (e.g., a ment to be their most important source of retirement the same age as previous cohorts, or they would have to Specific Aspects of Retirement Confidence—Twenty-three • panic-Americans, interviews were conducted in English The multiple-use test would be repealed, requiring the This excess amount would increase by 10 percent per currently use the All rights (56 percent), despite the fact that a similar proportion Security may account for most of an elderly person’s monthly annuity for life of $631; with $39,286, he would needs. Thirty-eight percent of workers are not confident Retirement be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, or interpretative rule, or as Who Were Provided Informa trillion. This includes private- and public-sector plans tion legal, T Work for Pay After Retiring Grassley (R-IA), and a group of bipartisan cosponsors. oday’s —Many individuals in each ers provide their employees with educational materials 3 percent of all workers said they expect that money provided by their employer will The retirement envisioned by today’s workers by the time they retire, only 36 percent have thought (39 percent) that they are investing wisely. One-third of workers are Seventy percent preparing for retirement (R Social Security or employer-provided money as their score of 21 to 25). Thirty- eligible for full benefits from Social Security. Forty-three Chart 8, Retirement Planning Personality Types parents’ retirement (21 percent). they will have enough money for their retirement and ing a 5 percent annual real rate of return over 40 years, gram is facing similar but more immediate constraints if Reasons for Not Saving ............................................. 20 than planned, and many will do so for negative reasons. their standard their most important source of income, those who retired they are doing the right things, but they are not positive. not too well, or not at all? enjoy financial planning (77 percent), and are willing doing a retirement Treasury Department to revise nondiscrimination accounting, actuarial, or other such professional advice. 12 house or child’s education) is a major reason they are not income (table 13). 84 percent of the rate necessary to maintain their level of Treasury Department would be required to develop percent of Asian-Americans are not confident that they wait to a later age to receive full benefits. Under this year for each year from 2001–2005, reaching a maxi- Internet or Intranet or Spanish, according to the preference of the respon- reserved. get a monthly annuity of only $348. has accumulated less than $25,000 toward their income, the elderly may view another source such as a (both defined benefit and defined contribution) with a 3 minority group say they expect to work for pay after they be a major source of retirement income. Forty-six percent expect the money they put or the opportunity to attend seminars about retirement looks different in many respects from that now experi- (36 percent) are somewhat confident, i.e., they think they about insurance coverage for long-term care or nursing confident that percent of workers are planning to retire before age 65. Conclusion to accumulate a retirement nest egg worth nearly ...................................................................... of workers20 one percent, with an R Among Americans most important source of income in retirement (39 per- ..................................................... score of 16 to 20, appear to be 16 Asian-Americans those with lower household incomes are particularly the system remains unchanged. According to the Trust- —Forty-nine percent of Asian-American Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 Retire early, and nonsavers are more likely than others to find ment Confidence Survey. Changes in the economy or stock market may affect their to take substantial financial risk for substantial savings needs calcula- of living in more stringent rules for disclosure, including suffi- regulations and issue a determination letter regarding saving for their retirement. For 39 percent of Asian- are doing a good job of preparing financially for their reform, the OASI tax would gradually increase from mum of 50 percent more than the dollar limit technologies, an dent.Saving for retirement (54 percent). 10 Workers planning to retire earlier are generally 40% 41% 50% total of $7.6 trillion, as well as assets in IRAs with a pension as “most important” if in their eyes that is what Various elements from all of these bills were Source: Susan Coronel, Long-Term Care Insurance in 1996 (Washington, Confidence EBRI Issue Brief is registered in the U.S. Patent and Trademark Office. ISSN: 0887-137X 0887-137X/90 $ .50+.50 into a retirement plan at work to be a major source of income. The availability of a home needs, and just 16 percent report having accumu- Retirees enced by current retirees. Current workers expect to they will have report they are doing a good job, and a similar proportion appear to be are doing a good job but are not sure. Finally, 4 percent Of these, one-fourth believe they will be eligible four or Appendix I—RCS Methodology $132,000. With a 10 percent annual real rate of return, .................................... 22 Chart 9, Workers’ Confidence in Their Overall cent and 30 percent, respectively) (table 4). Eighteen Overwhelmingly, nonsavers are most likely to ees of the Hospital Insurance Trust Fund, the amount a. I am disciplined at saving. savers say the feeling that they could not count on Social likely to identify these other reasons. their retirement experiences worse than expected. confidence levels in the future. financial gain (42 percent). Approximately three- tion. retirement is at cient information so that an individual participant Americans who are not saving for retirement, the feeling Asian-Americans 10.6 percent in 2000 to 14.92 percent in 2060, while the retirement. This is just about equal to the proportion of —Forty-eight percent of Asian-Ameri- the nondiscrimination tests. In theory, a sample of 1,002 yields a statistical Table 8 DC: Health Insurance Association of America, September 1998). applicable at the time. In addition, qualified retire- additional 37 percent 24 Table 3 means the difference between a bearable retirement with better prepared than those who are planning to retire at total of $1.9 trillion. Table 5 provides further breakdown This analysis is modeled on a segmentation analysis done by Public Agenda later melded into the omnibus tax bill passed by the 3 retirement plan at work is credited by 48 percent of savers as motivation to save. work longer than current retirees actually worked before lated $100,000 or more for retirement. In addition, many are not too confident and 2 percent are not at all confi- enough money personally doing an adequate job (32 percent with an R percent of retirees report that their personal savings are score of more years before they actually will be (25 percent), Appendix II—Current Legislative Proposals Very well (2) Well (1) ............... Not too well (0) 23 Retirement Income Prospects, by Race say having too many current financial responsibilities is Not at all (0) _____ points .................... 18 Security gave them a lot of motivation to start saving for being paid out in Medicare benefits is currently exceed- $20 a week saved over 40 years can accumulate to over Male workers are more likely than female Retirement Readiness Rating by Workers’ 40% least as good as 12 • “Catch-up” contributions for individuals ages 50 and fourths are confident they are investing their Similar and EBRI in the 1994 report, that they still have lots of time until retirement is a cans say they expect personal savings to be their most could compute his or her projected benefit under the 11 all workers who are not confident (24 percent). Twenty- ment plans could include “side car” IRAs. Expected vs. Actual Retirement Age Promises to Keep (New York, NY: Public expect to use them precision of plus or minus 3 percentage points (with Table 14 This assumes that $9.41 buys an annuity of $1 per year payable monthly • Deniers (13 percent of Americans) feel it is pointless to Private insurance currently finances only a small portion of long-term care just Social Security and a comfortable retirement with age 65 or later. This is good news, in that those planning Retirement of employment-based plan assets into federal plan House and Senate in the summer of 1999 (H.R. 2488), 3 retiring, and many say they plan to work for pay after dent that they are investing their retirement savings consider themselves savers rather than investors and Appendix III—What is Your R for a comfortable retirement. Majorities are also confi- —Retirement 40 percent think they will be eligible one to three years $500,000 (chart 6).Overall Confidence saving money Agenda, 1994). Four of the five groups were originally identified in that study. 11 to 15). Nineteen percent appear to be doing a poor job their most important source of income. According to data a major reason they do not save for retirement (66 per- retirement. Among Asian-American savers, 46 percent workers to say they expect to work for pay after they ing the amount of money being collected in tax revenues, (D.M. McGill, K.N. Brown, J.J. Haley, and S.J. Schieber, Fundamentals of 4 Employers play it was just before they retired (43 percent say it is better, retirement savings wisely (73 percent). Not surpris- findings emerge from Could we send a friend or colleague a complimentary Workers’ Retirement Preparations and Planning, by Race plan as amended. needs. Theoretically, individuals with assets to protect should be willing to Did you read this as a pass-along? Stay ahead of employee benefit • Being unable to find savings information that they older would be allowed, by increasing the elective save this additional $20 per week, 12 percent say they major reason they are not saving. important source of income in retirement. Employer- eight percent of African-Americans are not confident, • U.S. Department of Health and Human Services, Social Security Adminis- Tax-free withdrawals from IRAs for charitable within two years. 95 percent certainty) of what the results would be if the Expected Most Important Sources of plan for retirement (59 percent) and, more than any to retire earlier are apparently building the financial 21% assets, state and local government plan assets, and both sources. which was subsequently vetoed by President Clinton. At b. I am not willing to take any financial risks, no matter what the gain. 30% 3 Expected Actual • While worker education is a point of emphasis among both employers and Private Pensions, Seventh Edition, Philadelphia, PA: University of Pennsyl- 19% report risk-averse investment behavior. dent about having enough money for basic expenses, Readiness Rating? they retire because they enjoy working and want to stay ..................................................... for retirement— 25 wisely. pay for long-term care insurance. While the chances of having extended long- score of 6 to 10), and 10 percent seem to be doing a earlier than they actually will be, and 17 percent do not To put these potential accumulations in context, 25 (Rissues with your own subscription to tration, cent). Other issues workers cite as major reasons for not for 1997 available from the Current Population Survey 1999 Annual Report of the Board of Trustees of the Federal Old-Age EBRI Issue Briefs for only $49/ and the existing Medicare trust fund is estimated to be say the fact that they started earning enough money to retire (75 percent versus 61 percent). Generation X copy of EBRI Issue Brief? The segmentation was accomplished through the use of K-Means Cluster a major role in 38 percent say it is about the same). A similar proportion ingly, 88 percent are confident that they will have other studies. KPMG provided money is expected to be the most important and 42 percent of Hispanic-Americans (more than any entire population age 25 and older were surveyed with understand and trust (15 percent). would not have to give up anything to do so. Those who purposes would be allowed beginning in 2002. (percentage of workers) (percentage of retirees) Majorities of respon- other group, they think retirement planning takes too vania Press, 1996). The Role of All Very Somewhat Not resources with which to do so. However, the fact that In contrast with current retirees, one-half of Very well (0) Well (0) Not too well (1) private employer assets (with further breaks into term care needs are small, the costs of such needs are extremely high. Only a Not at all (2) _____ points Income in Retir this writing (late 1999), selected pension-related ele- ement and Survivors Insurance and Disability Insurance Trust Funds 3 (Baltimore, policymakers, more remains to be done. For example, 59 percent of workers expect Pamela Ostuw, Bill Pierron, and Paul Yakoboski of involved—not because they need the money. Today’s 5 Analysis. In this method, initial cluster centers are estimated from responses to year electronically e-mailed to you or $99/year printed and mailed. Fear continues to be one of the primary motiva- about their financial preparations for retirement, about an increase from 63 percent who reported saving for very poor job (R (CPS), Social Security accounted for 40.9 percent of the Data on actual asset allocation in 401(k) plans score of 0 to 5). Not surprisingly, those African- Hispanic- Asian- know when they will be eligible for full benefits. Just saving are: be able to save for retirement is a key motivator. Seeing workers (69 percent), older baby boom workers (73 per- note from above that the median amount saved for depleted by 2015. 3 say their experience in retirement in terms of having ensuring 20% enough money to live comfortably in retirement, reports that 62 percent R Score Workers Confident Confident Confident source of money for 15 percent of Asian-Americans. The other minority group) are not confident about this aspect small portion of those who can afford long-term care insurance have actually dents say that There are no complete accuracy. Likewise, each of the minority • Not being confident in their ability to make good would have to sacrifice are most likely to say they would 13 MD: Social Security Administration, 1999). much time and effort (35 percent). Many are impulse the selected survey questions. Each respondent is then assigned to the cluster current workers (49 percent) expect personal savings to workers planning to work longer before retiring have trusteed defined benefit assets, trusteed defined contri- See B. Douglas Bernheim, Is the Baby Boom Generation Preparing ments of the bill were under consideration as part of For more information about subscriptions, visit our Web site at Ages 54 or Younger Total American 5% American American 20% to be eligible for full Social Security benefits sooner than they actually will be, and EBRI wrote this Issue Brief with assistance from workers are also changing their expectations about their as of 1996 reveal great heterogeneity in worker decision tors for saving for retirement. Not being able to count on 11 percent of those planning to retire before age 65 are retirement by current workers who are age 60 and older retirement in 1998 (chart 2). A slightly larger proportion with household incomes of $75,000 or more are more income of the elderly (age 65 and older). Income from • purchased it. For individuals who have no assets to protect or who believe they Having other savings goals, such as a house or people not prepare and then struggle in retirement also cent), and younger boomers (70 percent) are all more Various reform proposals designed to improve Tables adequate Send an issue to almost all believe they will have enough money to of employer respon- c. If I just save some money each month, I will be fine in my retirement. whose average responses for each question are closest to the respondent’s. Once decisions about saving (13 percent). Adequately for Retirement? Summary Report cut back on dining out or entertainment. sale of a home or business is expected to be the most of retirement. Pension Provisions: (Merrill Lynch & Co., Inc., communication efforts quick fixes or samples of 200 has a precision of plus or minus 7 per- African-Americans—Thirty-three percent of African- 5 shoppers (42 percent), are frequently set back from Ages 55–59 13 16 generally accumulated less than others is of some U.S. Department of Health and Human Services, Health Care Financing www.ebri.org or complete the form below and return it to EBRI. bution assets, and assets held by life insurance be their most important source of income in retirement pending minimum-wage legislation. the Employer will never require formal care, such insurance may never be worth the price. Very Good (21–25) 8% an additional 19 percent admit they do not know when they will be eligible. 10% 26% 3% <0.5% the Institute’s research and editorial staffs. Any Social Security, seeing people not prepare and struggle of workers report that they and/or their spouse are all respondents have been assigned, the cluster centers are recalculated. The making, even among workers in the same demographic able to give their correct eligibility age. In contrast, is $39,286 (for those ages 50–59 the median retirement 1993); and B. Douglas Bernheim, likely to score highly, but those who are married, those pensions, individual retirement accounts (IRAs), 401(k)s, education (36 percent). Is the Baby Boom Generation Preparing the financial condition of the Social Security system have gave Asian-American savers a lot of motivation to start likely than pre-boomers (57 percent) to say they think Very well (0) Household Has Saved for Retirement Well (0) Not too well (1) Age 60 Not at all (2) 75% 54% 13 48% retirement 6 76% take care of basic expenses (95 percent), and more dents to their 1998 Administration, 1999 Annual Report of the Board of Trustees of the Federal important source of 11 percent, and 10 percent say they When asked about confidence in having enough “silver bullets” centage points (with 95 percent certainty) of what the Americans expect personal savings to be their most 20 • However, others may lack information on the probability of needing such care; Sec. 415(b) limits would be increased to $160,000, Among those workers who are not currently their financial goals (68 percent), or unwilling to take Good (16–20) 31 48 36 8 (table 4). Twenty percent of workers expect to rely most concern, since these are the workers most at risk for The absence of equity fund holdings does not necessarily mean that a plan Organization assignment of respondents to clusters and recalculation of cluster centers are companies). This represents both employee savings and The final version of H.R. 2488 contained numer- Adequately for Retirement? Technical Report (Merrill Lynch & Co., Inc., Table 1, Number of Workers Ages 18 and Over views expressed in this article are those of the 2 in retirement, and realizing that time is running out to saving for retirement (75 percent) (chart 3). Male work- Household Has Attempted a Retirement Savings Needs Calculation who work for businesses with more than 100 employees, Hospital Insurance Trust Fund groups. According to the EBRI/ICI Participant-Directed Ages 61–64 52 46 13 (Washington, DC: U.S. Government Printing 34 29 55 18 percent of those planning to retire at age 65 and 8 • No retirement savings plan offered at work (31 per- saving for retirement (42 percent). they will work for pay after they retire. been put forth. Several of these have been analyzed by savings is $71,250). Further perspective is provided by may mistakenly believe that they are already covered by Medicare, health This means that if an individual turns 62 in 2004, his or her normal preparation. Adequate (11–15) 32 0% 17 38 33 Nothing contained herein is to be construed as an attempt to provide legal, accounting, actuarial, financial participant has no exposure to the stock market. Indeed, more than one-half of than three-fourths believe they will have enough survey of retirement repeated until the cluster centers remain stable. This results in distinct groups expect it will be full- or part-time employment (table 13). Name money to take care of medical expenses in retirement, then indexed to inflation in $5,000 increments. that will ensure results would be if every member of the working minor- important source of retirement income. This includes Fifty-seven percent of workers who are not 1992). saving for retirement, similar proportions of male any financial risks no matter what the gain (46 per- Conclusion on employer-provided money, and 12 percent of workers involuntary early retirement. Savers Who Could Save Another $20 per Week for Retirement employer contributions. Office, 1999). Age 65 69 71 30 78 14 69 ous provisions aimed at making individual saving and and Social Security Eligibility Ages, • There is evidence that education can have an impact on individual behavior. Forty authors and should not be ascribed to the officers, insurance, or disability insurance; or may be dissatisfied with or mistrustful retirement age (the age at which the individual would qualify for full benefits) d. I think preparing for retirement takes too much time and effort. prepare are among the major factors that respondents Retirement Plan Data set (1996), the share of assets Started Saving, Started Saving Changed Changed 24 percent of those planning to retire at age 66 or later the individuals with no equity fund holdings had investments in either Address data from the Survey of Income and Program Participa- Poor (6–10) 19 8 19 29 of Americans who respond similarly and in ways that clearly distinguish them and those who expect to rely primarily on personal cent). the EBRI-SSASIM2 Policy Simulation Model, which is The foregoing findings are not surprising in light 1 Most obviously, 40 percent of all workers report that money to take care of medical expenses (76 percent). benefits offer employ- 22 currently saving for retirement say that it is reasonably The Retirement Confidence Survey (RCS) is sponsored by the Employee 14 workers and female workers report that it would be 36 percent of African-Americans and Asian-Americans Sec. 415(c) limits would be raised to $40,000, then retirement ity population age 25 and older were surveyed with both personal savings for retirement through a plan at planning or other such professional advice. Any views expressed in this document should not be ascribed to the Nonsavers Who Could Save $20 per Week for Retirement Ages 66 or Older 57 56 17 66 12 59 cent). One-half of this group is not confident about 2 of policies that are currently available. Still others may not purchase See Retirement Benefits in is 65 years, 10 months. Furthermore, if an individual turns 62 in 2008, his or The question of whether workers in general, and for First Time Again, After The model accounted for probable economic developments over the course of Amount Allocation of 6 By comparison, total retirement plan assets in expect Social Security to be their most important source employer stock or balanced funds. For all participants with no equity funds, investing more attractive, boosting IRAs, and providing Very Poor (0–5) 10 1 3 30 from other groups. Organization Generation X includes those workers born in 1965 or later; younger boomers United States, 1997 Very well (0) .................................................... percent of workers receiving educational material at work in the last year said that Well (0) Not too well (1) 4 trustees, members, or other sponsors of EBRI, For a description of the model, see Kelly A. Olsen, Jack VanDerhei, Dallas Not at all (2) _____ points identify as giving them a lot of motivation to save. give their correct eligibility age. 16 tion. According to that data source, the median net Benefit Research Institute (EBRI), the American Savings Education Council savings (either through a retirement plan at work or • Expecting to have a pension (26 percent). uniquely able to provide comparative analysis of propos- of developments already under way in the work place. See Gale (1997) for additional critiques. Expect to Work in Retirement Stopping they expect money provided by their employer to be a Contributed insurance because of the knowledge that Medicaid covers long-term care. The Never Retire Mone 68 y in Plan 62 5 61 the 1990s: 1998 Survey Data n/a 54 her normal retirement age would be 66 years, six months. ees some education or a lifetime and took account of Social Security, private pensions, taxes, interest Reasons for Not Saving say they are not confident. Fifty-three percent of His- income security complete accuracy. There are other possible sources of work and retirement savings outside of work. The possible for them to save $20 per week for retirement. In 34 percent of assets was in company stock and 8 percent was in balanced City/State/ZIP possible for them to save $20 per week for retirement. Several cluster solutions were examined and a five-group solution was include workers born from 1954–1964; older boomers include workers born indexed to inflation in $1,000 increments. having enough money to live comfortably in retire- Retir L. Salisbury, and Martin R. Holmer, “How Do Individual Social Security ement Preparations and Planning officers, trustees, members, or other sponsors of the Employee Benefit Research Institute, the EBRI Education of income. Not surprisingly, expected reliance on per- baby boomers in particular, are saving adequately for 1985 were $2.4 trillion. This means that U.S. retirement Table 2, Workers’ Expected Social Security Age (ASEC), and Mathew Greenwald & Associates (MGA). The RCS was enhanced retirement savings opportunities through ........... 4 18 information caused them to begin saving (19 percent) or resume saving (21 percent) EBRI-ERF, or their staffs. Neither EBRI nor EBRI- Have Received Employer-Provided Education Materials in the Past 12 Months However, the availability of a retirement plan at work use of private insurance is expected to grow as plan design improves and as an 42 42 33 (KPMG, 1998). 41 rates, inflation, economic growth, family composition, and employment outside of work) or on employer-funded plans are also Therefore, many workers are making plans and • Lots of time remains until retirement (24 percent). funds. The post-World War II trend of male workers leaving the als for Social Security reform under random outcomes on financial assets of all U.S. families in 1995 was selected as revealing the most distinct personality types. Each of these groups Address 18 from 1946–1953; and pre-boomers include workers born in 1946 or earlier. 17 Source: Employee Benefit Research Institute, American Savings Education major source of income in retirement, and the same Accounts Stack Up? An Evaluation Using the EBRI-SSASIM2 Policy 9 • Savers guidance on saving for The measure of “on track” is based on calculations in a study by Bernheim (18 percent of all Americans) are very much for today’s workers. The good news is that 70 percent of panic-Americans are not confident, and 38 percent of all Gross financial assets less unsecured debt. Sec. 401(a)(17) limits would be raised to $200,000, error in all surveys, however, that may be more serious addition, 69 percent of workers who are already saving second-most often cited expected source of income is See Craig Copeland, Jack VanDerhei, and Dallas L. Salisbury, “Social underwritten by 24 organizations, and the RCS Minority Survey was Generation X workers who are not currently saving are Source: Employee Benefit Research Institute, American Savings ment (50 percent), and 40 percent are not even increasing number of individuals recognize the possibility of needing long- sonal savings as the most important source of income their retirement has prompted much research over and Research Fund, the American Savings Education Council, Mathew Greenwald & Associates, Inc., or their prospects. assets in tax-qualified plans have quadrupled over the Table 3, Expected vs. Actual Retirement Age employment-based plans. The following is a list of those ................ 4 Your Name19 for retirement, while 40 percent said they changed the amount they were contribut- has unique views on retirement and the planning and saving process, as well ERF lobbies or takes positions on specific policy 23 Simulation Model,” and earning enough money to be able to save are also EBRI Issue Brief no. 195 (Employee Benefit Research Council, and Mathew Greenwald & Associates, 1999 Retirement Confidence Source: Employee Benefit Research Institute, American Savings Education Council, preparing for their retirement without even knowing 21 African-Americans $1,000. and Scholz that uses the Bernheim model described earlier, so the data suffer Among those nearing retirement age (house- 22 —The top reason given by African- more likely to score highly. • 3 Not knowing where to start (18 percent). See Survey on Employee Security Reform: Evaluating Current Proposals, Latest Results of the EBRI- work force at successively earlier ages ended in the mid- the future growth of the economy and on returns in both underwritten by nine organizations. Survey methodology and a list of proportion say it will be a minor source (41 percent). Household Savings Education Council, and Mathew Greenwald & Associates, 1999 —Asian-American households are the See Jack VanDerhei, Russell Galer, Carol Quick, and John Rea, “401(k) like planners. They are disciplined savers (88 per- retirement. This is 19 term care and the associated costs. The largest barrier to the expansion of the For a complete discussion, see Joseph F. Quinn, “Retirement Patterns and report that it is possible for them to save an additional more likely than nonsavers in any other generation to Americans are saving for retirement and a growing workers are not. then indexed to inflation in $5,000 increments. than theoretical calculations of sampling error. These money from an employer (i.e., a pension or an employer’s confident of having enough money to take care of basic as varying degrees of confidence in aspects of retirement and the preparations City/State/ZIP See Joseph M. Anderson, The Wealth of U.S. Families in 1995, Report to recent years. Research by B. Douglas Bernheim has How did you do? Add up your points and turn the page over to see how you stack up. Source: Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, 1999 Retire 15 Institute, March 1998). Total Score: ment Confidence Survey. _____ points past 13 years. increases as age Table 4, Expected and Actual Most Important Source from the biases discussed in reference to Bernheim’s “baby boomer retirement elements of the vetoed bill that were intended to promote Survey. decreases, while expected reliance on and Mathew Greenwald & Associates, 1999 Retirement Confidence Survey. Savings Plans 1997 (William staffs. SSASIM2 Policy Simulation Model,” underwriters can be found at the end of this EBRI Issue Brief ing to a retirement savings plan and 41 percent changed the allocation of their money Issue Brief no. 210 (Employee . See William G. Gale, “Will the Baby Boom Be Ready for Retirement?” proposals. EBRI invites comment on this research.The powerful motivators. Americans for not saving for retirement is too many Plan Asset Allocation, Account Balances, and Loan Activity,” EBRI Issue Bridge Jobs in the 1990s,” private long-term care insurance market is the lack of public readiness to use Retirement Confidence Survey. EBRI Issue Brief no. 206 (Employee Benefit when they will be eligible for Social Security. These hold head ages 55–64) median net financial assets were • Social Security will take care of them (16 percent). The Retirement Readiness Rating only partially the equity and bond markets, rather than relying on 1980s, as older male labor force participation rates have made. Even more important, however, 46 percent expect that most likely of the minority group households to be saving Merrill Lynch (Chevy Chase, MD: Capital Research Associates, 1998). cent), many research and plan for large purchases up from 46 percent in percentage (49 percent) are going further and determin- Twenty percent of Asian-Americans are not include refusals to be interviewed and other forms of contribution to a retirement account). Twenty-four $20 per week (chart 5). Among those who say they could index.” say it would be possible for them to save $20 per week. M. Mercer, 1997). Benefit Research Institute, June 1999). expenses. Brookings Review (Summer 1997): 5–9. 7 Social Security examined whether current workers are saving at a rate Brief no. 205 (Employee Benefit Research Institute, January 1999). increases with age. Generation X workers Research Institute, February 1999). assets to insure against the relatively low probability of need. of Retirement Income.................................................. 5 The disability insurance (DI) tax rate remains at 1.8 percent. in a retirement savings plan. findings suggest that more action is needed on the Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 or Fax to: (202) 775-6312 or Fax to: (202) 775-6312 EBRI Issue Brief Number 216 • December 1999 • © 1999. EBRI 4 28 6 26 10 18 8 12 14 24 2 22 20 16 December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief December 1999 • EBRI Issue Brief 11 17 15 19 21 23 13 25 27 7 3 5 1 9 Dollars Accumulated Issue Brief Issue Brief

Volume 216

Pages 28

EBRI Issue Brief

Pamela Ostuw

Paul Yakoboski

Bill Pierron

Retirement