This Issue Brief reports findings from the 16th annual Retirement Confidence Survey (RCS), which suggests that many American workers are not ready to undertake the task of financial planning for their own retirement and face the prospect of having to work far longer than they expect.

• This Issue Brief reports findings from the 16th annual Retirement Confidence Survey^® (RCS), which suggests that many American workers are not ready to undertake the task of financial planning for their own retirement and face the prospect of having to work far longer than they expect.

• Key indicators steady: Key indicators of retirement planning have held steady in recent years. The proportion of workers saving for retirement continues at 7 in 10 (70 percent), while those who report having attempted to calculate their savings needs for retirement remains at 42 percent.

• Modest savings: More than half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000 (52 percent). However, the large majority of workers who have not put money aside for retirement have little in savings at all: Three-quarters of these workers say their assets total less than $10,000 (75 percent).

• Expected benefits unlikely to materialize: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 40 percent of workers indicate they or their spouse currently have a defined benefit plan, yet 61 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect (37 percent) as retirees are to receive (40 percent) retiree health insurance through an employer, despite the fact that the number of employers offering this benefit is declining.

• Unrealistic replacement ratios: Worker suppositions about their financial needs for retirement are often based on what appear to be unrealistically low income replacement ratios. While a majority of workers say they prefer a standard of living in retirement that is the same or better than in their working years (59 percent), half think they can maintain a comfortable retirement on 70 percent or less of their preretirement income (50 percent).

• Ability to keep working? Some workers may have unrealistic expectations about how long they can continue to work. The average retiree today retired at age 62, but the average worker expects to retire at age 65. At the same time, workers are more than twice as likely to expect to work for pay in retirement (67 percent) as retirees are to have actually worked (27 percent).

• Some confidence levels not realistic: The RCS continues to find that one-quarter of workers are very confident about their financial security in retirement (24 percent), while more than 4 in 10 are somewhat confident (44 percent). However, at least some of those who say they are very confident may be overconfident. Twenty-two percent of very confident workers are not currently saving for retirement, 39 percent have less than $50,000 in savings, and 37 percent have not done a retirement needs calculation.

• Auto-enrollment well received: To boost participation, employer plans could be further enhanced by adding automatic options. A majority of employed workers favor automatic enrollment (69 percent), automatically increasing the percentage of salary contributed when an increase in pay is received (65 percent), and automatically investing contributions for the employee (59 percent). Plan participants and nonparticipants are equally likely to favor each of these automatic features.

Figure 13, Retirees’ Concern About Their Financial Future, Compared With Right After They co current retire consistent finding is t about their re participating), those who have received m confident that the Social Security s share of income will co long-term retire The likelihood of doing a retirement savings fortably Em ment sa ploy through their retire es are to rec car tirem er-pr vings needs calculation (com e expenses (1 ent financial prospects appear to ovided retire hat knowledge eime from ve it (40 5 percent, 34 m m ent y ent education conti Social percent) (Figure 12 increases sharpl y estem will continue a retire rs (24 percent) Security percent) in re m paent pla red with t needs calculation incr ( be better prepared, on averag 20 y am nues to nning inform ), despite the fact that , while m per tirem hose who hav ong workers age 55 and ol to provide be cent) or an em pla ent. As y o an im re ation from than 4 in 10 with overall confidence, confidence about eases with household income, enefits of at least equal value to the not) tend t portant role. ploym an er-pr any e e, than those describe the m ovi em oder, who are ploy have higher l Am ded pension ploy er within the past ong the 4 ers are m who are selves a m e 8 m (14 percent). o vels of percent of odify re than s ing Retirement Age Ruth Helman is resea Retired........................................................................................................................ rch director at Mathew Greenwald & Figure 24 Figure 27 Figure 8 Figure 10 Figure 23 Associates, Inc. Craig Copeland is senior res............... earch asso12 ciate EBRI Improving Retirement Preparation RCS Methodology a twice as likely as youn education, an somewhat somewhat or elim year (com each of these savings. benefits recei workers receiving retirem Far fewer inatin Retirees wer confident. In turn, those who are confident (44 percent). Three in 10 worke pared with those g access to such coverage for future retir d the am sayved by the largest share of their retirem specific a e asked about ount of savings an ger workers to respond correctly. retirees toda swho have not pec ent planni ts of retire a set of risks that could po y (6 pe ng i d investm ), workers mn e rcent), and m formation fro n somewha t has re ent inco ents. having attem m rees. In addition, workers provide sim ts, confident appear to be better prepared overall than a In additi in however, are less confident that the om me will co ed re than one-quarter are an em trelatively entially on, pte ployer, 29 percent report m married workers are d a retire me from affect their abilit stable. Howe m employment (6 percent), the sale or entso savings needs calculation mewhat ver, workers are les y to m m ilar o confident (27 y re likel a will have odify nag esti em their finances iy ng t at than es of hseir likely per- at EBRI. The age at which the average worker Jack VanDerhei is a professor at Temp plans to retire has slowly le University and research dir crept upwards, fr ector of the EBRI Fellow om age 62 in 1996 's program. An to 6 y 5 Interest in A Calculated Life Expectancy Likelihood o Worker Pr u Retirement Educational tomatic Investment Opti efferenc Using Em es for S ployer-Provided Retirement tandard for Workers, by Gend Materials Used and Foun ons, Among Employed Workers of Living in Retirement er d Figure 14, Largest Expected and Actual Sources of Income in Retirement ..........................................13 These findings are part of the 16th annual Retirement Confidence Survey (RCS), a survey that gauges how m unm vi (co those who are not confi enough m ews m cent). At the same ti than 10 in retirem retire refinancing o A arri pared wi ex m ued workers, and homeowners pre ch inco a m jority oney to li ent planning as a res sse years ent d i th those who of m n f(Figure 16). t ago to sa e their hom workers expect to work fo h they ve com is rep will need, regardless of dm o ent re y tf , two-thirds are have not), and those who the ortabl are t e (3 percent), an inhe . Of these, they are u y hlt of the m are very ose y thr ofare o tughout he m confident ab aut anot too o te r pay in r h rial they e o their retir apt than rs a whether they expe m ritance (3 percent), or ( o nst likely 33 d s retirement to suppl e recei xpect to receive defined be out h percent) or oul no em having enough m d nowners, to have tried ve. In addition, those rec ent y not to sa be a ears, with 17 per y that not a ct to have such coverage. scrib some other source. an annual infl te em all d tent their inco o (34 percent) confident oney the o to c cent describing them nefit incom fto do ficers, t over basic expenses (35 per- e ation rate of 7 percent or iving retirement planning one. W m rust e. In 200 ees, e o from rkers age 45 or ot that future 6, two- an hers selves in 2006. One-third of workers plan to retire prior to reaching age 65; 13 percent say they will retire before Males Very Given tradeoff between sav Investment Most Helpfu ing in working years Advice, Amo l, Among Workers Saving for Retire ng Workers Somewhat Without Acc ess Not Too ment Females Not at All EMPLOYEE Overview the views and attitudes of Figure 15, Worker Assessment of Selected Risks working-age and retired Amer ................................................................................. icans regarding retirement, their preparations for 14 Informatio sponsors of EBRI Issue Brief EBRI, EBRI-ERF, or t n Sources for Retirement Planning heir staffs. Neither EBRI nor EBRI-ERF lobbies or takes positions on specific policy thirds of workers say and older (co em as not too ploy Social Security benefits will match or exceed the value cent in 200 inform m For exam ore is likely (33 percent er in r ation through an employ confident and 14 m e ple, 6, tirement (com padown from red with youn the reported t they expect to work for pa percent say 40 percent in 1 pvery ared with those who do o ger work tal of saving likely er tend to report better retire ing the ,ers), retirement savers (com 37 996). percent s and i y are y afnvestments increases as confidence in having not te somewhat r they retire (67 percent). Figure 3 not). at all of toda confide likely ment planning y’s benefits. Worker confidence that Social p n ). a t. There has been little consistent red with nonsavers), participants in a Two-thirds of retirees think it likely , including an increased likelihood While the 2006 RCS did enough not that age 60 and 20 percent plan to retire between the ages of 60 and 64. More than one-quarter of workers say Very 75% expect to live until age: and standard of living in retirement, worker would Interested Figure 26 Somewhat 77 Interested Not Too Interested 80 Not at All Most Interested th prop retire osals. EB ment, their confidence with regard to various aspect RI invites comment on this research. s of retirement, and related issues. The survey was Despite the American savings rate, level of debt, Issue Brief and other negative financial indicators, many workers change in the defined contri m ask about reasons for working in retirement, the 2004 The oney they will live Security of doi The stable proportio to live 16 ng a retirem will wave of the Retire se proportions in recent y comfortably bution continue to longer than e plan (c ent needs calculation. Half of all n of A throughout om prxpected (31 percent, 34 percen ovide benefit m pared m erican workers who ent Confidence Survey with non retirem ears. s that are at participants and those ent incrsave eases, and the likelihood of RCS documented that all but 3 in 10 workers expecti workers doing a least equal to today’s value (RCS for retirem t), and half think i ) suggests that not offered a ent has both calculation sa mt likel any having m personal and nati plan), and t A in y that the m y the creases sharpl eric y oney saved for an workers are not m hy a o de c se with or their spouse onal h yanges as a with age, ng B they will retire at age 65 (27 percent), while one-quart ENEFIT Reported Total Savings and Investments Among T er intend to re hose Providing Response, tire at age 66 or even later (25 percent). by Age 50% expect to live until age: A m prefer a retirement standa ix of stocks and bonds, often called a rd of living t Favorabilit Likely hat is: y Toward Aut Figure 12 Figure 14 85 Likely omatic Features of Used Likely 85 Helpful Likely Figure 16, Retirees’ Assessment of Selected Risks ...............................................................................15 conducted in January 2006 through 21-minute telephone interviews with 1,252 individuals (1,000 workers spend time reading about money and financial matters (Figure 22). In fact, two-thirds report having read acce econom retirement or having an IR to work for ready will require long-term and retirees are result (51 percent). ss to e to undertake the task of financial planning for th ic implications, sin m pay ploy in retire er-provided retire more likel m (not inclu care or assisted living ( eA opened with m ce Americans are far nt identified a y than worker d m in ent g value of pri planning infor t least one s to be confident oneym saved out 15 perc om re financial ary lik eir retire m residence or defined benefit plans) a en el tion or invest y side an e t, 35 to save about the mo m percent). Fewer believe it likel tive ent and face the prospect of having to work m for retirem for doing so. ploy future value of Social Security benefits. ment advice (co er’s retire ent than the However, only ment plan also increas mpar y are to save for ed with those not y that the 27 percent y or es Although the retirement age of the average retiree has increased slightly, from 60 in 1996 to 62 in 2006, a Higher tha Availability n in worki Largest Expected and Ac of Employer-Provided Health ng Employer-S years ponsored Plans, Among Employed Workers tual So Figure 19 Insurance Coverage in Retirement urces of Income in Retirement 12% In 25% expect to live until age: person Input from lifecycle fund, based on your spouse your expected 30% 42% 90 87% 12% 16% 90 10% No. 292 R Figure 17, ESEARCH Workers’ Confidence in Having Enough Money to Live Comfortably Throughout Their and 252 retirees) age 25 and older in the United States. Random digit dialing was used to obtain a about this t far longer tha opn ic in the m they expect. onth prior t The RCS fin o the survey ds that Am : 23 ericans have opinions and percent say they spent up to beh an hour, aviors that hi 19 pender their rcent say they having access with confidence. Si any of the 2006 re their spouse will have large other goal. The RCS finds that one-quarter of ) m tirees report having actually worked for orem often report try ilarly, the tendenc me dical expenses not covere ing to do a calculation. y to perform workers save for a pa retire y at som Worker Age Group d by Medicare or insurance (8 percent, 27 ment sa e time during the vings needs calculation increase retirement and either have no other ir retirement. Those who s with percent), gap remains between worker expectations and the e Strongly xperience of current retire Somewhat es (Figure 7). Somewhat Strongly 10% expect to live until age: Online Workers The same Workers Written mater retirement date. When as in working ial received fr yWorkers’ ou’re a long y om ears your em Confidence in Financial Aspects of Reti 14 36 ployer or Figure 17 96 19 29 rement Retiree 47 95 Retiree s s Similarly, 5 percent of workers are very confident that the Medicare system will continue to provide ® Retirement Years ......................................................................................................................16 representative cross section of the U.S. population. Starting with the 2001 wave of the RCS, all data are spent one to two hours, and 24 percent indicate they spent three hours or more. This means that workers are Source: E specific savings goal (16 confidence in having en worked m ability have to provide financial assistanc E Some worker BR m to realistically I E ploy mo ploye ee st Benefit Research often say e Bes who report nefit R assess the prep t esou h eey wanted to st p a Institute and Math gh m rc ercent) or sav h Indoing a calculation use pr stit oney ute Is to arations needed to ensure a fina se ue B to a relative (10 pe l ew Gr ive com e for nothi ay rief active and eenwald & (ISSN fortab 08 ng Associates, 87 - else (11 percent) (Figure 2) involved ly. 13ofessionals or standardized methods to deter 7 At the same ti Xrcent, 20 percent), or lose their hom ) is Inc., pu (96 bli2 s006 Retire hepercent) or enjo dncially mont me, retir hl my b ent Co secure retirement. While a y the nfidence Survey E e. Two in m mp y ent savings goals also loy ed worki ee Ben 10 . efitn workers save R e an g (79 esear d/or m ch percent), m In ine sti o tut st of e, All Favora Ages ble Favora Ages April 2006 ble Neut Ages ral O Ages ppose OAll ppose ByI benefits of at least equal va The same Very wayteleph NSTITUTE your em fromone retirem ploy as in working ee rnt, the fund is invested ’s retirem Workers’ lue to the benefits yent plan pro ears for the first 10 Confidence in 9 25 v ider rec Having Enough Money to Live y eears of retire ived by (Expected) retirees today (Expected) Somewhat m72 ent, , while 29 percent are 28 38 Not Too (Reported) (Reported) 15 somewhat Not at All a 2121 K Street, NW, Suite 600, Washington, DC 20037-1896, at $300 per year or is included as part of a membership subscription. Life expectancy is calculated by adding expected age at retirement and expected length of retirement for workers providing both pieces of information. weighted by age, sex, and education to reflect the actual proportions in the adult population. Data from the more likely to spend time reading about money and financial matters than they are to spend time reading Source: E for their children’ tend to rise with confidenc how m but m majority their possessi Figure 18, Retirees’ Your em o m u re than 7 in ploy ch they of A eeplo Benefit Research my will need ( eric er would enro ons in an s or grandchildren’ 10 also identify ans have Confidence in Having Enough Mone Institute and Math une e Figure 5). More than one-t . Perhaps some of th m xpected ev ll ade so you at least one s education (19 in me ew Gr financial pr ent (5 percent, 17 percent). eenwald & financial reason for having worke e increased preparation am Associates, eparations, saving is m percent), and 1 in 10 each save for a home purchase or hird say the Inc., y to Live C 2006 y asked a financial advisor (35 percent) and Retire om m ent Co o fong the ortably re likely nfidence Survey d (72 T m to take place when h opercent). roughout re-confi . d Their ent workers Workers 25–34 35–44 45–54 55+ Retirees and then lower Comfortably Throughout Their Reti Confident Confident rement Years Confident 17 Confident Yes (net) confident in the sy Personal savings (net) Newsp more aggressi apers, magazines, or other written material vely, with higher risk and stem (Figure 21). Many more, however, are 37% not too 48% 64 (36 percent) or not 40% at a 22% 8 ll (28 percent) Periodicals postage rate paid in Washington, DC, and additional mailing offices. POSTMASTER: Send address changes to: EBRI Issue Preparing—or Not—for Retirement Figure 7 Tabl 2005 e of and 2 Contents 006 RCS are also weighted b y retiree status due to the oversamples of nonretired Americans. is due to the fact that they renovation (10 percent) or approxim about h encouraged b Workers who plan to work om ae tel , lifesty y y 1 in 10 each filled out a worksheet or form an em le, and f ployer-provided ret a a vacation (9 percent). ashion (54 re generally in retire percent), sports (53 m m irem ent oreare subject lik ent savin ely S than less-confident work maller proporti gs to the sa plan, such (10 percent) or used an online calculator (8 per- percent), me ons of worker as a 401(k), t or celebrity stresses that c ers to participate in an os h r entertain an when left solely a m n lead to an unplanned ention saving for an ment news to Brief, Less than $10,000 21 the plan and s 21Retirement Years K Street, NW, Su et up itey 60 o0, Wa ur ............................................................................................................... 39% shington, DC 20054% 34% 31% 36% 30% 37-1896. Copyright 2006 by Employee Benefit Research Institute. All r....... ights 16 Em confident that Medicare’ Having enou Lower tha A work-place retire The advice of a financial professional the potential f ployer paid 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 gh m n o in worki r hig oney her returns. As you m to ent ng s benefits will continue to eq ta y savings plan, ke care of ears such as ual or exceed the benefits received by 16 63 21 13 beneficiaries 40 Planned and Actual Retirement Age reserved, No. 292. Will More of Us Be Working Forever? Data for waves of the RCS conducted before 2001 have been weighted to allow for consistent comparisons; (51 percent). Nevertheless, workers are most likely to spend time reading about news and current events e em cent). However, one-third say early indivi m Source: E ergency ploy retirem dual ini me mnt- ploy (6 percent), their general well-being (5 ent. It is n b tiative. Moreover, the findings suggest ee ased retire Benefit Research oteworth ment plan and to have acces Institute and Math the y that w y created their own hile exp ew Greenwald & ectations am percen s testi h to em Associates, at although m t), a car, truck, or van ate (33 percent), and about 1 i ploy ong workers of obta Inc., er-provided educational education has been m 2006 Retirement Co (4 ining percent), or nam nfidence Survey paid emplo oderately m n 10 aterial or each read or . successful ye m other ent in $10,contributi000–$24,999 on through pay14 19 15 13 roll 6 12 Very Retiree paid Enhancing Employer Plans toda basic expense a 40 The advice of fam near retirement, the fund is y. Again, worker conf 1(k) s ily, friends, or co-wor idence about invested kers the future va Figure 16 lue of Medicare benefits increases with 9 14 63 11 13 age, and retirees 4 Overview ........................................................................................................................................4 Figure 19, Workers appear to have less of a grasp on the variab Workers’ Confidence in Financial Aspects of Retirem ility of life expe ent ................................................... ctancy (Figure 9). Many may be 17 Workers Retirees for employee benefits research consequently, some data in the 2006 RCS may differ slightly with data published in previous waves of the (87 percent). at boosting Saving for Retire retirement preparation, optio ment ns that default workers into more desirable retirement planning investm goals. However, nearly heard how much was need retirement do not appear to vary signific deduction, ent advice. unless y 2 ied (9 percent) or guessed (8 ou choose not n 10 workers do n antly by ot nam age, e any just 32 percent of retirees who left the percent). By com savings goal at all, say parison, al ing the most three- y do work force noquarters of t save toward $25,000–$49,999 12 11 14 14 8 14 Workers are more likely to save in a tax-qualified retir Retirees’ Assessment of Selected ement plan at work than they Risks are to save on their Costs shared by are confident Mone Inform more conserv 200 more likel ation available over the Internet y 6 from19% a y than workers to be confident. tively an IRA em 24% ployer and retiree to low 22% er risk. 22% 25% 34% 35% 22% 23% 10 39% 46 14 47% 21% 24% 11%9% 25% 14 5 7 24% 15% 9% planning Preparing—or Not—for Retirement for a retirement that lasts for as long as the The Emplo ............................................................................................... yee Benefit Research Institut y think they wiell live and fail (EBRI) was founded in 1978. Its ing to consider that they mi5ssion is to The 2006 Retirement Confidence Survey (planned) (actual) Nevertheless, many workers seem to have unrealistically low expectations about how much income they Figure 20, Confidence That Social Security Will Continue to CHECK OUT EBRI’ Provide Benefits of 6 S Wat Least Equal EB SITE! RCS. Data presented in tables in this report may not total to 100 due to rounding and/or missing categories. any within the pa workers who have not done a calculatio behavior m tWorkers who are hing specific (5 percent) or do ayst 10 also have their place. years report havi most confident about t not sa ng wn say ove at all (12 percent). rked for h the eir financial secu y guess at this num pay after they rity ret in ret ired. Althou ber (73 percent). irement also t gh work for end to expect pay duri to get the ng $50,to participate. 000–$99,999 12 7 16 12 12 11 34% 35% 2% 13% 15% contribute to, to encourage, and to enhance the development of sound employee benefit own. Fort Uncertain who pa A professionally m Somewhat Very Inform 200 A m ation from y5 - afjority ive percent of all workers (82 percent of of anaged y television or radio Am s ericans appear to be p account where an ersuaded 35 eligible work about the need to Somewhat 2 35 ers 42 ) say Not Too set aside they participate in an e m 11 Not at All oney to prepar 2 2 m e for Don’t 11 ployer- Other personal savings or Saving for Retirement.......................................................................................................... investments 20 ..................... 11 5 could easily live beyond that age. One in 10 workers think they have almost no chance of living until age 85 Before 55 6% 13% might need to maintain a comfortable lifestyle in retirement. Half of workers say they will need up to 70 per- In theor Value to Benefits Receiv y, each sample of 1,252 ed by yields a statistical Retirees Todayprecision of plus ........................................................................ or minus three percentage points 18 by Ruth Helman, Mathew Greenwald & Associates; Craig Copeland, EBRI; and programs and sound public policy through objective research and education. EBRI is the only m retirement ost out of re Findings in this y matire y increase, it is unlikely ment. Workers who are ear’s RCS include: that all who would very confident that the like to work will be able y will have enough m to do so. For some, this oney to live The percenta $100,000–$1ge of 49,999 your salary5 1 7 5 7 7 retirement. The RCS finds that 7 in Retirement Savings Needs ....................................................................................................... 10 workers and/or their spouses have saved money ................. for retirem 7 ent No 58 sponsored retirem Co independent i confident m 200 puter software 4 41 41 45 47 47 41 47 45 44 40 44 nvestm ent savin ent gs plan, b manager handles ut just 36 percen Likely 36 t have an IRA to which the Likely 24 47 Likelyy can contrib 8 Likely59 u te outside of 1 Know 8 Social Security 20 43 (10 percent) and 15 percent believe they have only a 25 percent chance of reaching that age. Only 15 percent Established in 1978, the Employee Benefit Research 55–59 7 16 1 cent of their preretirement income to live comfortably Figure 22 in retirement: 14 percent think they will need less private, nonprofit, nonpartisan, Washington, DC-based organization committed exclusively to (with 95 perc Who we are ent certainty ) of what the results would be if all Americans age 25 and older were surveyed with • Key indicators of retirement planning have held steady in recent Figure 5 Figure 2 years. The proportion of workers may com Jack VanDe fortably result in contributed t th reduced resources during retire roughout rhei, Temple University and EBRI Fellow o the plan wou their retirem ld ent years are ment, and th more likely ese workers than t hose who are less confident to plan t ’ retirement security is likely to be in o $150 Retirem,000–$ ent Age249,999 ................................................................................................................. 6 3 5 10 5 6 ........................ 9 Don’t know Not too work (26 Inflation g Inform (70 percent) (Figure 1). W Figure 21, 200 percent of workers report havi ation from 1 Co oes up b nfidence That Medicare Will Contin sem y 7% inars or h m ile the prop ore a ng an IRA th ortion of 37 wor at includes ue to kers having saved for retirement increased from Provide Ben mone 5 21 41 y rolled efits of at Least Equal Value over from 12 an e <0.5 mploy 2 er’ 10 s 1994– investment decisions based on your sayA traditional em they have almost a 100 percent chance of living t ployer-provided pension hat long. Simi14 larly, 6 in 10 workers think the 20 y have EBRI’s Web site is easy to use and packed Figure 21 60–61 10 11 than 50 percent, and 36 percent believe they public policy research will and need 50– education on 70 percent. Alm economic securi ost 3 in 10 t ty and em hplo ink they yee benefi can afford t issues. a Time Spent by Workers Reading About Selected Topics complete accuracy. There are other possible sources of error in all surveys, however, that may be more Method of Determining Savings Needed for Reti Worker Savings Goals, by Having S Institute (EBRI) is the only nonpr rement, by Doing a Retirement Need aved for Retirem ofit, nonpartisan ent s Calculation Source: E jeopard retire before m Length of y ploy saving for ret . ee Benefit Research age 65 and more than twice as likely Retirem irem entInstitute and Math e ........................................................................................................... nt continues at 7 in 1 ew Greenwald & 0 (70 to Associates, exp percent), while the p ect to live 30 Inc., 2006 Retire years or ment Co ercentage wh m nfidence Survey ore in retire ..................... o report havi . ment. They 9 ng are $250 automatically,000–$499,999 increase whe6 1 5 8 n you 13 12 th ® retirement plan). The likeli 2000 Online professional investment advice s specific cir confident 199y, it decliear to Benefits Received by 6 cumstanc 23 19 18 21 18 18 19 17 18 17 17 ned significantl es. Changes are hood y of parti in R 20 e01 a tirees Today cipating in nd has remained fa ervices 33% 37% ................................................................................... eit 40 her an em irly con ploy 15% 20 42 er-spo stant since then. In contrast, the pro nsored plan or 11 an I5% RA opened 2 10% 6 19 porti on almEm ost no chance (32 percent) or about a 25 percent chployment 6 EBRI’s membership includes a ance (27 percent) of reach cross-section of pension funds; businesses; trade associations; ing age 90, while only 2 in 2 Confidence That Medicare Will Continue to Provide Benefits 62–6 • 4 10 This Issue Brief reports findings from the 16 annual Retirement Confidence Survey23 (RCS), which comfortable retirement with 70–85 percent of their preretirement income (28 percent), while 7 percent expect 3 Hours or serious than theoretical calculations of sampling error. These include refusals to be interviewed and other Income Needs in Retirement..................................................................................................... with useful information! ( (m multiple responses accepted) ultiple responses accepted) .............. 10 also less likel Source: E attem mployy to expect that they p ee ted to calculate thei Benefit Research Institute and Math will w r savings need ork ew Gr for eenwald & pa s for retirement rem y after they Associates, retire Inc., 2 . At the sam 006 Retire ains at 42 percent. ment Co e time, nfidence Survey very co . nfident $500 get a raise, unless y ,000 or more ou choose for 6 4 4 8 13 10 of retirees having saved for retirement has tended to increase very gradually, from roughly half in 1994–1997 Not at all with m Doing a go You live lon made as oney saved outside ma od rk g job of e et conditions r than expected preparing of work increases or personal labor unions; heas household i alth 31 care prov iders and insur ncom 34 e rises. ers; government org 15 anizations; 8 and service firms. 11 organization committed to original public policy 10 thi The sale or refinancing of nk they have about a 75 percent ch your home ance (13 percent) or a 100 percent chance (6 percent). 3 1 65 27 of at Least Equal Value to Benefits Received by Retirees Today 14 Figure 22, suggests that many Time Spent by Workers Reading About S American workers are not read elected Topics y to undertake th .................................................... e task of financial plannin 20 g for to need 85–95 percent. Just 12 percent think t No Time heir incomUp to 1 Hour e in retirement will need to be about 1–2 Hours More the same or Sources of Retirement Income................................................................................................................ 12 Source: E forms of nonr mployee Benefit Research esponse, the effects of question wordi Institute and Mathew Greenwald &ng Associates, and question Inc., 2006 Retire order, and screening. Whil ment Confidence Survey. e attempts are • More than half of workers saving for retirem ent report total savings Did Retirement Needs Cal Have Saved for Retirem and investments (not incl culation ent uding workers are this not t moro e ha likely ppen. than those who are not confident to 32 prefer a standard of living 33 1 in reti 16 rement that is 17 Risks in Preparing for and Managing Retirement financially confident to m Employ ore than two-thirds in er-sponsored plans fo16 15 13 r retirement 2006 also represen (68 percent). 9 10 17 10 16 13 17 14 t a significant proportion of workers’ retirement savings (Figure You (or circumstances change. your spouse) require long- 26 44 15 14 An inheritance Older Americans tend to offer lower estimates of their chances of living 3 until each of the target ages than 1 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 66 and older their own retirement and face the prospect of having 25 to work far longer than they expect. 10 higher than right before retirement. News Workers offered an em and current events ployer-provided retirement savings 13% plan ar 15% e more apt than those without this t 17% 55% ype Risks in Preparing for and Managi rng Retire esearch and education on economic security and ment................................................................................... 14 made to minimize these factors, it is impossible to qua EBRI’s work advances knowledge and unders ntify the errors that may tanding of emplo result from yee benefits and their them. Question Total Yes No the sa Total Figure 23, methe value of their prim or be Retirem tter than in their working ent Educational Materials Used and Fou ary residence or a years. ny defined benefit plans) of less than $50,000 (52 nd Most Helpful, Among WorYes kers No percent). Source: E Your contrib Some workers mployee Benefit Research utions woul may be underesti Institute d and Math mating the likelihood ew Greenwald & Associates, Inc. of risks that can hinder thei , 1996 -2006 Retirement Confide r abilit nce Sur yv to eys.pr epare for Doing a retirement savings calculation seems to be an effective tool for changing savings behavior. Half 25). Si 200 x in 6 10 plan participants say half or more of the 25 money that they and their 50 spouse saved in the past 12 14 12 A mix of stocks and bo term care or assisted living nds, typically called 15 35 28 13 9 those who are Support from younger, despite the fact that the your children or ot Look for these special features: her family y have already reached an older age. This is particularly Workers Never retire/n • Not surprisingl Key indicators steady: ever worked y given that Key retirement is the prim indicators of retire ary m savings goal, t ent planning have held steady 7 he greater part of savings a in recent y 7 ears. The nd of plan to expect retiree health cove Mone y and fi Many financial planners nancial matters suggest that workers plan for a retire rage. Others who m 34 ore often say 23 m the eny t income replac will receive this type of coverage 19 ement ratio of at least 24 Retirement Confidence or Overconfidence importance to the nation’s econo .................................................................................. my among policymakers, the news media, and 15 the public. It wording and individual question sample size are available on request. Retirement 70% Saving for Retirement.......................................................................................................... 100% NA .....21 Guess 44% Nevertheless, However, the large there is considerable room majority of workers for im who have provement in saving not put moneyfor retirem as8% ide for retirement have little in ent among at least so73% me retire of workers who do a calculation report they ment (Figure 15). automatically be invested for Workers were yo as u ked to assess make cha the likelihood that each of six possible ris nges as a result (51 percent). Most often, those who ks would employee benefits. months for retirem You have to a balanced fund, with a m 2005 provide a relative with ent was put int oderate risk o their employer’s pl 26 an (60 percent). Seven in 46 10 state that half or m 12 16 ore of Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey. evident when com members paring the responses of workers (wFigure 1 ho have a median age of 43) and retirees ( 2 m1 edian age of invest Very m e proporti nts appear to be accu on of workers saving for retirement contin does this b mulated specifically y conducting for and p reublishing policy re tire ues ment. As a result, at 7 in 10 (7 sear 0 ch, analysis, percent), while those who report many workers may and special reports on tap into include workers expecting to receive reti Hom 70 percent of e, lifesty Overall Retirem le, and fashion their preretire ent Confide m nent inco ce .................................................................................................. m ree m . Indeed, if ent inco 46 me fro workers equate comfort with current retirees’ m a defi 23 ned benefit plan (co 17 mpared ............ with those 15 15 standard The RCS was co-sponsored by the Employee Benefit Research Institute (EBRI), a private, nonprofit, Children’s or grandchildren Ask a financial advisor savings at all: Three-quarters of these workers ’s education 19 say 19 their assets total less than $10,000 (75 percent). 35 23 5 9% of those who say they are very confident. Twenty-two percent of very confident workers are not currently occur. Seven in 10 make changes say unless you choose investments say the th yat inflation started saving more going up b m yoney 7 pe ( rcent or m 59 percent), but other steps they ore a year is very (31 percent) take include changing or somewhat their household’ 2004 s total retirement savings are in this plan (70 pe • EBRI’s entire library of research publications starts at 26 rcent). Plan part 47 icipants unde 14 r age 45 (com- 12 that the fund financial assi could lose mone stance y, but 10 20 28 41 1 72). On t Figure 24, he o Li ther hand, t kelihoodh of U ose in sing Em emplo Am excell ericans yee benef ploy ent or er-Provided R Having Save ivery good ts issues; holding educational br health tend to offer higher esti ed Money for tirement Investment Advice, Am Retirement iefings for EBRI memb mates tha ong ers, congressional and n those in fair A lum W confident p-su hat we do m distribution from 3% 3% 4% a cash bal 7% ance 6% 7% 5% 5% 6% 7% 5% their retirem Confide having attempted to calculate their savi nce i ent savings for n Other Financia other needs, l Aspects of such as educ Retirem ngs entneeds for ............................................................................ ation, hom retire e purchase, or emergencies. Am ment remains at 42 percent. 16 ong workers of living, they may find they have underesti EBRI’ mated (Fi s ovgure 11). erall goal is to pr Many retirees report the omote soundly con- y have higher income who are not), Sports Perhaps beca those e use they mployed in the public sector (co are already living in retire47 19 m m en pt, ared with private-sector retirees are considerably workers), and those with 14 20 more likely than workers nonpartisan public policy research organization; and Mathew Greenwald & Associates, Inc., a Washington, saving for ret Do A home purchase or renovation your own estimate • Many irem workers are counting on em ent, 39 percent have less than $50, ployer-provided 17 000 in savin 10 benefits in retire gs, 32 percent d 33 m 10 ent that ar o not have an IRA opened e increasingly 4 9 (42 percent) l on your ikely to own. occur. Roughly half believe th 23 at they or t 36 heir spouse are likely 2 to have to 19 provide a 19 their investment mix (20 percent), researching ot federal agency staff, and th her sav e news ings m media; eand sponsoring public opinion survey thods (7 percent), and reducing debt (6 s on emplo per- yee pared with older participants), tho generally 2001 the gains would be higher tha se with fewer as n set 27 s (compared with higher-asset participa 43 16 nts), and private- 13 You (or Workers Wit your spouse) have large hout Access ..........................................................................................................22 or poor plan or Workers While the average age at retirem health. Although traditional pensio wom n en are more likel the main W ent is likely y tha to continue to incr n eb page. Click on men to live until each of t ease EBRI Issue Briefs and m ha ese ages, wo ny workers Retiree rkers respond may and work until s who provi Somewhat Overconfide ded both t nce? ................................................................................................................ heir total assets and the amount accumulated specifically1 3 for retirement, three-quarters ..................... 17 • Modest savings: More than half of workers saving for retirement report total savings and income of at least $35,000 Celebrity replacement r or entertain atios: One-third of retirees (34 percent) ment news (compared with lower-income workers). 49 say their curr 26 ent income16 is about the same as their 9 to be very confident that they will have enough money to live comfortably throughout their retirement years Source: E DC-based mploymarket resear ee Benefit Research ch fir Institute and Math m. The 2006 RCS data co ew Greenwald & Associates, llection was funded by grants fro Inc., 2006 Retirement Confidence Survey m about two dozen . Read or hear how m A vacation uch needed benefit issues. EBRI’s Ed 11 ucation and Re 9 search Fund 9 13 (EBRI-ERF) performs 13 2 the charitable, with money unavailable. saved outside Only 40 of an em percent of workers indicate ployer’s retirem ceived emplo enyt pl ee benefit programs. EBRI does not an, and they or their sp 37 percent have not d ouse currently one a retirem have a defined ent needs relative with financial assi cent). stance (22 percent very likely, 32 percent somewhat likely), will be unable to work sector participants (compared with public-sector participants) are especially likely to report all or almost all the rate of inflation 1996 22 26 51 46 10 17 16 10 Confide medical expe nce in Entitle nses that are ment Program not s ...................................................................................................... 18 Source: E simtheir planned Don’t know/ Have ilarly mploy regardless of gender. ee Benefit Research Rretirement age, others could find t efused Institute and Mathew GrSaved eenwald & h Associates, emselves retiring sooner. The R Inc., Currently Save 2006 Retire 3 ment Confidence Survey CS has consistentl . Have Saved 6 y found report that these amounts are very confident investme20 nts (not including 21 24 24 29 32 28 34 31 30 29 roughl EBRI Notes the value of their prim y the same for our in-depth and nonpartisan periodicals. (76 percent). ary residence or a Workers who have not ny defined benefit plans) of less saved for preretirement incom Even with their relatively e (meaning ab high levels of income out a 100 percent replace replacement and benefit coverage, ment of their preretirement inco many retirees are me), 2 in 10 say (Figure 18). Figure 25, Four in Proportion of R 10 retirees ar etirement Savings in e very confident (40 Em percent), and one-third are ployer’s Plan, Among Plan Participants somewhat confident ...............22 educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization public and private organizations, with staff time donated by EBRI and Greenwald. RCS materials and a list Mone Fill out a wor y for an benefit plan, k em sheet or for ergency yet 61 percent say m they are expecting to 5 6 receive inco10 me fro 6 m such a plan in retire <0.5 5 ment. calculation. In addition, 14 percent of those offere a d a retirement savings plan a by their employer are not a for six m onths or more (16 percent, 30 percent), or will encounter medical expenses not covered by insurance of their total r Source: E Having enou mploye ee tirement savings are in their em Benefit Research gh money to t Institute and Math ake care of ew Grploy eenwald & er’s plan. Associates, Inc., 2006 Retirement Confidence Survey . An investment like a m covered by Medicare or oney market fund Improving Retirement Preparation ...............................................................................................20 that approximately 4 in 10 retirees l lobb Mone eave t y or endorse specific appr y he work fo rce earlier than planned (38 Money oaches. Rather percent in 2006). Many , it pro- Money retirement generally Not too than $50,000 have little saved at all; three-quart (52 percent). However, the large ers say majority of workers their savings and invest who have not ments total less than put money aside their current income is higher (21 percent), and m supported by contributions o and g re than 4 in 10 rants. state it is lower (44 percent). (Retirees facing financial pressures. (33 percent). Retiree confid Half of retire ence has also es report they remained relatively are on a fixed budget (52 stable over the past few y percent) and al ears. most 4 in 10 of underwriters may be accessed at the EBRI Web site: http://ebri.org/surveys/rcs/ contributi General well-being Use an online calculator Likewise, wo ng. rkers are as likely to expect (37 percent) as retiree 3 5 s ar8 e to receive ( 5 40 percent) retiree 0 6 (18 percent, 27 percent). S Figure 26, Favorability T omewhat fewer feel that th oward Automatic Features o ey or f Em their spouse will have to retire two or m ployer-Sponsored Plans, Among ore y ears Employer-Provided Education and Advice medical expenses with little risk of losing mone Informinsurance ation Sources for Retirem y, but wit • T ent Planning o get answers to many frequently asked questions about h 8 27 32 ....................................................................................28 .... 20 4 retirees who retired early1994 57% cite negative reasons for leav ing the work NA force before they expected, including 52% $10, confident 000 (75 percent), and another 12 38 37 34 38 38 31 40 36 35 33 36 percent have total assets of $10,000–$24,999. for retirement have little in savings at all: Three-quarters of these workers say their assets total less indicate that inflation has affected their retire were not asked to account for inflation.) ment lifestyle more than they had expected (37 percent). More vides balanced analysis of alternatives based on the A car, truck or van Base on cost of living/desired retirement 4 5 2 health insurance through an employer, despite the fact that the number of employers offering this early (11 percent, 30 Employed W perce orkers nt). Of the six risks, workers ............................................................................................................... are least likely to think they are at risk for losing ....23 Em Retirement planning m ployer-Provided Education a aterials provided nd Advice......................................................................................... by an employer or retirement plan provider can also be effective .... 21 gains likel The am 2006 ount of time spent reading about y to be only slightlEBRI Issue Brief y higher finance in is a periodical providing 19 creases sharply exper 42 as household i t evaluations of 20 ncome or education employee benefit issues and 17 You lose your home and/or most of health proble1995 58 ms or disability (40 percent) or changes at th Figure 25 eir comNA pany, such as downsizing or 48 closure Not at all The RCS findings suggest t than $10,000 (75 percent). hat m employee bene? ost nonparticipants would not obj ts, click on Bene? ect to the intr t FAQs. oduction of these Figure 9 than 4 in 10 are now more concerned about their financial future than they were right after they retired Confidence in Entitlement Programs Workers with higher household income or higher Figure 18 levels of assets are more likely than lower-income A second home or vacatio lifesty Retirement Savings Needs le benefit is declining. n home 3 1 4 2 3 0 trends, as well as critical analyses of employee benefit policies and proposals. EBRI Notes is a their hom Enhanci e and/or m ng Empl ost of their possessi oyer Plans....................................................................................................... ons due to an unexpected event (6 percent, 23 percent). Perhaps .............. 22 in persuading some worker 2005 s to change their behavior. 20 Almost half of workers stat 38 21 e that they have received 20 rises. In addition, m than the rate of inflation en say they spend m facts. ore time th Through its activities, EBRI is able to fulfill its an wo11 50 men, and retirement savers report spending m 18 20 ore your possessions due to an (30 percent). Figure 27, Proportion o1996 60 Int Som erest in Automatic Invest e retirees f Retirem mention a mix of positi ent Savings in E ment Options, Am mve a ployer’s Plan, Am nd negati ong Employ ve reasons for retiring early, but NA ed W ong P orkers lan Participa .............................. nts 52 just 1 24 2 per- features into their em confident • Expected benefits unlikely to materialize: 37 ploy34 36 30 27 26 26 25 26 28 28 er’s plan. Both current plan Many participants and n workers are counting o onparticin p em ants appear equally likel ployer-provided y Worker and Retiree Estimated Chances of Living Until Specific Ages (42 percent) (Figure 13). These retirees most often mention that this is due to higher-than-expected general workers to cite savings as their largest s Although confidence about both Social Security periodical providing curr hare of re Figure 11 tire and ent m in Medicare has increased over the past 10 ent inco formation mon a variety e, but many of of emplo these workers yee benefit to may ypics. ears, not be EBRI’s Health expenses One reason for the m Retire odestes’ Co totals of savings and in nfidence in Having Enough Money to Live vestm 2 ents may be that 2 many workers do n 1 ot know how Other • Workers’ suppositions about their financial needs fo4 4 4 r retirement are often based on what appear to be Source: E because they RCS Methodology mployee Benefit Research have fewer re ................................................................................................................ Institute and Math sources to fall back on ew Greenwald & and therefore Associates, Inc., m 2006 Retire ay be m mo ent Co re co nfidence Survey ncerned about the . ........25 time than non retire Endnotes 200 ment educational mat 4 savers, reading about t erials or se his topic. minars from 21 an employer or 40 work-related retirement plan prov 21 17 ider in unexpected event • EBRI’s reliable health and retirement surveys are just a 5 17 39 35 4 cent offer 1997 66 only positive reasons. The consequences of an unplan Retirement Savings ned earlyNA retirement can be heavy50 . Retirees to report favoring each of these automatic features, although participants are somewhat more likely to say Retirees benefits in retire Al most ment that a About a re increasingl About a y unavailable.About a Only 40 percent of workers indicate they Don’t or expenses or inflation (48 percent). Fewer cite unexpected or rising medical expenses (13 percent), not saving Pension Investment Report mission to advance the public provides detailed financi ’s, the media al information on th ’s, and e universe of defined Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey. concern abou saving at rates neces Figure 28, Our t the future of Investment Option Most Li sary Percentage o both to provide the needed income Comfortably Throughout Their Reti program f Prereti s is high (Figure 20). kely to Achieve Retirement rement Income Needed in R . (Surprisingly, even 2 in 10 of those who say Fewer than 1 in rement Y Savings Objectives, Am ears e 10 workers say the tirement ong y are ver the yy Other 7 much they need to save for retirement (Figure 4). Only 42 percent of workers report the7 y and/9 or their spouse unrealistically low income replacement ratios. While a majority of workers say they prefer a consequences, workers with assets under $25,000 are Source: E Endnotes mploy....................................................................................................................... ee Benefit Research Institute and Mathew Greenwald & m Associates, ore apt than those with hi Inc., 2006 Retirement Co gher assets to nfidence Survey ................ . say each of 25 the past 12 months (48 percent). Among these workers, 3 in 10 report modifying their retirement planning as 2001 20 38 22 19 who retire ear 1 1998 59 lier than planned are more likelyof Past 12 M than those who retire on tim onths NA Total Retirement Savings e or later than planned to sa59 y they they strongly their spouse currently favor automatic enrollment. In additi benefit, defin have click away through the topic boxes at the top of the page. a defined benefit plan, ed contribution on, , and 401(k) plans. while ye em t 61 percent say the ployed workers with ho EBRI Fundamentals of Employe y are expecting to receive usehold incom e Benefit e of at Workers use a wide variet Despite interest in these types of Very 100% y of sources for inform options, workers still prefer to make their own decisions (Figure 28). 75% 50% ation when m a25% king retirement savings and invest Almost No Know/ ment enough money (8 percent), overestimating Social Security or pension benefits (6 percent), misjudging how Workers In the RCS Employ , retiree ed W refe orkers rs to i............................................................................................................... ndividuals who are retired or who are age 65 or older and not emRetiree ployed fs ull t.... im24 e. and their spouse have not 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 saved for retirement mention some form of savings as their largest source of Not saving for any have tried to standard of li calculate how m thing (else) specifi ving in retirement that is the same uch m c oney they will need to or better than in th 21 have saved by eir working the tim 22 e they years (59 percent), retire so that the 18 y can these events is likely to occur. Lower-inco policymakers me worker ’ kno s and those in wledge and understanding of em- fair or poor health are also more likely a result of the material they 1996 receive (29 percent), 18 most frequently38 by saving more 24 (48 percent of those 17 Programs offers a straightforward, basic explanation of employee benefit programs in the All or alm are not confident about having a com ost all 1999 73 fortable retirement or 25% about haNA ving enough money 28% for ba 67 sic expenses in Emleast $35,000 ploy confident ed workers income fro are m m5 om re of ore likel such a plan in retire ten say 10 12 12 22 14 18 19 16 20 12 y than lower- that they, m income workers ment. Likewise, aking their own invest Figure 20 to say workers are a the my e favor automatic enroll nt decisio s likely to expec ns, can do the t (37 percent) as ment, m best job of ore than decisions. Depending Chance on the specific so Chance urce, this means that many Chance Chance may be using Chance questionable or Refused long t Worker heir savings would la refers to all individual st (5 percent), or investm s who are not defined as en ret ts not do irees, rega ing a rdlesss well as of empl expected (3 percent). oyment status. Overall, the amount that workers think they need to accumulate for a comfortable retirement appears to retirement income.) Workers em publications ployed in the private (needed in retire sector are m also m ent) ore apt than those in the public sector (current income) Very Not saving fo live com fortabl r anyy thin in retirement. As with having saved g else/at all 23 for retirement, the pro 15 portion of workers attem 41 pting a half think they can maintain a comfortable retirement on 70 percent or less of their preretirement than their counterparts to assess most of these events as likely. private and public sectors. EBRI Databook on Employee Benefits is a statistical reference making m Having enou odifications) or changing gh money to pay for lo their ng- investment mix (33 percent). • Instantly get e-mail noti? cations of the latest EBRI data, About three-fourths retirement. 2000 78 15 NA 15 59 half of lower-income workers favor eac Confidence That Social h of these features. Security Will Continue to Provide Benefits unprofessional inform achieving theAge 85 Somewhat retirees ir retirem are to receive (40 percent) retiree health insu atio ent n in developi savings objectives (47 percent) plo ng their plan yee benefits and their impor for retirem . One-qu ent rance through an em . Alm arter believe that having all ost 9 in 10 m tance to our nation ploy arried workers who er, despite the fact of their ’s that Source: E 2 mRetiree ployee Benefit Research s are most likely Institute and Math to insure against the risk ew Greenwald & Associates, of high m Inc., 2006 Retire edical m co ent Co sts. More than half of retirees nfidence Survey. be rather low (Figure 6). Three in 10 workers say they need to save less than $250,000 (30 percent), and Lower (don to be counti confident ’t ng on savings. know percentage) At the same time, public-sector workers are depending on NA pension 6% income more Figures needs calculation increased from income (50 percent). 26% 33% 19% volume on 1994–2000, 31% employ 34% ee b declined in 2001, and enefit pro 37% grams 40% and work has re 39% force related mained statistically 42% issues. 40% unchanged 40% Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore, “Recent Changes in U.S. Family Finances: Evidence termIn addition, a care substantial proportion of workers using a financial professional to help them with About half Like retirees, 2001 69 some workers are likely surveys, publications, and meetings and seminars by to find them 21 selves vulnerable to an unplanned early 61% 28 61 retirement for the number of em of at Least Equal Value to Benefits R ployers offering this benefit is declining. eceived by Retirees Today have saved for retire contributi Workers confident ons directed into 35 ment say 15% a professionally m 31 35 39 40 49 38 44 37 42 50 they use input fro 26% anaged acc m their spouse when making retire 32% ount would be m 15% ost effective (25 percent). Despite m 10% ent savings and 2% without em ployer-provided health coverage say they have purchased a Medicare supplement plan (52 per- another 2 in Less than 50% 10 mention a goal of $250,000–$499Figure 13 ,999 (19 percent). 14% Two in 10 think they need $50 17 0,000– Somewhat often than those in the private sector. In addition, Based on interest expressed by workers, employ low ers er-inco choosing funds for the automatic invest me workers are more likely than those with ment feature fr since that ti •om t Some workers he 200me. 1 and 200 m 4a S yu have u rvey of C nrealistic expectations oeconomy nsumer Finances . ,” Fed about how lo eral Reserve ng t Bulletin hey, V can co ol. 92 nti (F nue to work. ebruary 2006) : The A1–A38. retirement savings and i 2006 nvestment decisions obtain 15 access to this professional through their employ 34 26 23 er. Figure 15 Figure 1, Americans Having Sa health, family, and other reasons. There is so ved Money for Retirement me indica.................................................................... tion that workers may not be taking these factors into 5 About one-fourth 2002 72 30 61 21 62 high i nterest overall, fewer select a lifecy • Unrealistic replacement ratios: 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 cle fun Worker d (1 suppositions 3 percent) or balanced fund ( about their financial needs for retirem 11 percent) as the single ent are invest Retirees Retiree Not too ment decisions (87 pe s are even less likely than wo 14 rcent) and m Contact EBRI 17 clicking on the Sign Up for Updates box at the top of our o rkers to name spe re than 7 in Publications, (2 32 10 savers use c02) 659-0670; ific savings goa written 26 fax publication ls, although 1 in 10 report saving material received at work (72 6 orders to (202) 775-6312. 5 per- $999,999 (21 percent), while about 1 i cent). This means that almost 3 in 10 of n 10 each believ RCS retiree es they s do n o need to save $1 million–$1.49 t report having health insurance coverage other million (8 per- higher household i50% Retire–70% es’ Co 36 ncern About ncome to say Their Financial Future, that their largest share will co Compared me from With Right After Th Social Security or em ey Retired 13 ployment. of a plan m confident ight wish to consider lifecy 42 34 28 39 41 37 32 35 27 40 33 cle funds, professionally managed accounts, and balanced funds, 3 average retiree today retired at age 62, but the average worker expects to retire at age 65. At the 8 Although half 2005 of workers getting information from 17 a financial professional seek one on their 30 25 own (49 per- 26 Worker Assessment of Selected Risks 4 Alm account when the 20 ost none 05 OAS2003 71 DI Trusy tees R determ epoine their plann rt, Tabl Subscriptions to e V.A4.—Cohort Life ed retirement ag S EBRI ince its inception, EBRI’ Issue Bri 7 Expectancies, efs e. For exam are included 62 as part of ple, one m s membership has EBRI ight expect th membership, or as part of 5 64 at workers a cent). Less t Workers Age most effe90 confident ctive option. often based on what appear to be unrealistically han two-thirds of workers saving for retir 35 34 39 36 23 16 26 26 31 24 26 em ent say low income replac they have refere emnced newspa ent ratios. While a maj pers or maga- ority of for their general well-being (9 percent) and 5 percent each say they are saving for an emergency, a vacation, than Medicare (28 percent), either through home page. their employer or purchased on their own. Two in 10 retirees Figure 2, W cent) or $1.5 orker Savings million or moGoals, by re (10 percent). Having Saved for Retirement ....................................................... 6 Not too Much m rather than more conservative investment funds such 70%While some –85% ore concerned 28 workers may be underestimating how m as a um ch income their accu oney market fund. One-third of e mulated savings will generate, 17% 6 mployed same time, workers are more than twice as likely to expect to work for pay in retirement (67 per- Figure 4 cent), nearly 2004 3 in 10 say they 2006 Retirement Confidence Survey Under $199 annual sub had access through work scription 16 to EBR (28 I Notes percent). Two in 10 and 35 EBRI Issue Brie writers fs. mention another arrange In 26 dividual copies are av 22 ailabl ment e Very www.ssa.gov/OACT/TR/TR05/V_demographic. html#wp1 Somewhat 56683 Not Too Not at All Don’t Don’t know describing their health as f2004 68 air or poor would be planni3 ng on retiring at a 58 younger age than those in better 3 65 Very workers say they prefer a standard of living in retirement that is the same or better than in their Workers zines (64 percent), the advice of a financial professio Not at all 6 13 n 20 al (63 percent), and the advice of fam 27 32 ily or friends 2 their children’s or grandchildren’s education, and health expenses. Roughly 3 in 10 retirees each are not state they have purchased long-term care insurance (21 percent), while 1 in 10 have looked into purchasing Somewhat more 85%–95% 7 concerned grown to represent a cross section of pension funds; 25 1 workers indicate they others may confident be expecting to rely on 20 18 24 20 14 10 16 12 16 12 12 would be very em interested (34 percent) and 4 in ployer-provided benefits that the 10 woul y mayd be not receive. Workers are as somewhat interested cent) as retirees are to have Workers actually Having Tried to Calculate How Much Money worked (27 percent). with prepayment for $25 each (for printed copies) or for $7.50 (as an e-mailed electronic file) Figure 3, Reported Total Savings and Investments Among Those Providing Response, by Age .......... 7 Source: E (21 percent), O m 200 Aon ploy rders/ ee C 1 Benefit Research onsu such as a frie lting Institute and Math nd or famew Gr ily me eenwald & mber who is a financial professional. Figure 28 Associates, 15 Inc., 2 Prin 006 Retire 29 cipal Fin ment Co ancial Gro nfidence Survey 26 up . 28 4 Likely Likely Likely Likely Know health. However, the planned retirement age distribution is roughly similar, regardless of health status. 2005 69 62 66 confident working 3% y ears (59 percent), half think they 5% 6% 7% 7% can m 8% aintain a com 6% 7% fortable retirem 7% 8% ent on 70 percent or 6% saving for any Retirees (63 percent) t confident ot help them hing specific (29 percent) or at all (33 16 8 make financial decisions a 17 11 12 8 bout retirem 21 percent). 7 13 16 ent. Fewer report havin 22 8 11 34 a g used inform9 10 8 ation Many low-income retirees would qualify for Medicaid Figure 6 in addition to their Medicare benefits, eliminating the need to this type of coverage (11 percent). Retirees are less likely to insure against longevity. Just 12 percent of all About the same likely 95%–105% to expect that the (about the same) y will receive reti by calling EBRI or from rement in www. come fro ebri.6 org. m a defi Change of Address: ned benefit EB (or “traditional”) pension RI, 2121 K Street, NW, Suite 11 34 Not at all (39 percent) in having their retirement plan dollars invested in a lifecycle fund (which becomes more They Need to Save for a Comfortable Retirement Alliance Bernstein There’s lots more! Procter & Gamble 199 More than one-quarter of workers report their e 8 Investment businesses; trade associations; labor unions; health car Option Most Likely to Achieve 12 mployer offers the 33 m access to professional financial 28 26 e Inflation goes up by 7% or more a 2006 70 64 68 Source: E The RCS continues to find mployee Benefit Research Institute that one-quarter of workers are and Mathew Greenwald & Associates, Inc. very confident about t , 1996 -2006 Retirement Confide heir financial security nce Surveys. in Figure 4, WAge from Somewhat pu95 the Internet (46 percent), television rchase less of their preretire or orkers Having Tried to Calculate How Much Mone have a privat e source m o ent income (50 percent). f suppl or radio (3 emental cove 5 rag percent), co e. y T mputer software (24 percent), se hey Need to Save for a minars Many Americans have little money put away in savings and investments (Figure 3). Among RCS retirees (10 percent of those without inc Amount of Savings Needed for Retir 600, Washingto ome fro n, DC 20037, (202) 659-0670; emm ent, a d by Doing a Retirement Need efined benefit plan) have purchased an annuit fax number, (202) 775-6 s Calculation 312; e-mail: y. Those Somewhat less concerned conservative as retire 105% confident plan (61 or m percent) as retiree ore (higher) 8 11 24 ment s are to receiv nears) (Figure 27). One-quarter would 8 11 11 11 11 13 e it (62 percent). At the same ti 6 be very me, only 4 in interested (26 percent) and m 29 10 workers report they 21 7 13 ore 1994 31% Source: E Bar mc ployee lays G Benefit Research lobal Investor Institute s and Mathew Greenwald & Associates, Inc. Retire , 1996 m -en 2006 Retir t Security Proj ement Confide ect nce Surveys. Source: E advice (27 pe subscriptions mployee Benefit Research rcent), but m Retire Institute and Math a ment Savings Objectives, A ny of these w ew Green orkers im wald & ple Associates, ment only mong Employed Workers Inc., some of the advice they 1994–2006 Retirement Confiden receive, preferring to ce Surveys. y Emear ployer matches have been somewhat 31% effective in 42% boosting 18% participation in 401(k)-t6%y pe plans, but are 3% retirement (24 percent), while m Length of Retir confident •Co m Ability to keep working? fortable 17 e Retirement ment 17 16 21 21 26 25 26 28 23 27 Publications Subscr o ......................................................................................................... V re than 4 in 10 are isit EBRI on-line today: www Some workers iptions@ebr may somewhat have unr i.org. confident (44 percent). How Membe ealistic expe rship Information: ctations about .ebri.org Inquiries reg ehow lon ver, at least .... arding EBRI g7 they can workers provi Workers (21 percent), 5 or online professional advice servic ding this ty 3 pe of information, m 5 ore than es (213 0 percent) to half report that the total value of their household’s help with the 20 se decisions. 57 2 a providers and insurers; government organizations; and Source: E with household incom mployee Benefit Research e Institute of at least $35,000 and t and Mathew Greenwald & hose Associates, Inc. with savings and investm , 1996 - Did Retirement Needs Cal 2006 Retirement Confide ents of $50,000 or m nce Survey cs. ulation ore are Much less concerned Don’t know/ and/or their sR pouse currently have this t efused ype of plan (40 percent). This means tha 3 t up to 20 16 percent of workers 2 Tthan 4 in he addition of th 10 would be e phrase “and/or som your ewhat spouse” to the question wo interested (44 percent) in a professionall rding for married respondents starting in 199 y managed account ( 9 is responsible for w appr here an oximately Resp Benefits Am ondents were ericas, not iLLC n1995 32 formed of the relative cost differences amSoci ong t et hy ese for options Human R . esource Management You make y make their own investment decisions. Am our own investment decisions ong workers offered professional investment advice through thei 47% r You have to not successfuprovide a relative with l for all workers. Eighty membership and/or contributions to EBRI-ERF -seven percent of employees offered a plan with a m should be directed to EBRI President/ASEC atch report some of those who say they are very confident may be overconfident. Twenty-two percent of very confident Not too Although individual worke continue to work. The ave rs mrage retiree to ay be significantly day retired underestimating how long the at age 62, but the average wo y will spend i rker expects to n Source: E savings and invest Retirees Source: E mploy mee ploy Benefit Research ee Benefit Research ments, e 3 Institute and Math xcluding the Institute and Math ew Gr 3 value of their ew Gr eenwald & eenwald & Associates, primary 8 Associates, Inc., home and any Inc., 2006 Retire 213 006 Retire ment Co m defined benefit plans, is less ent Co nfidence Survey nfidence Survey 63 . . 9 4 to 5 per Retirees tend to express higher levels confidence th centage points of the increase between 1998 and 1999. an workers about each of these financial aspects of Total more likely than their counterparts to report having purchased long-terYes m care insurance. No are counting Buck Cons on getting this benefit from ultants: An ACS Company a future employer—a scenario that is beco TIAA-CREF Institute ming increasingly Figure 5, Met independent Perhaps not surprisingl hod invest of Determining Savin ment m y, am anager m ong the sources of retirem ag kes s Needed investm for Retirement, b ent decisions based on their specific circu ent information identifie y Doing a Retirement Needs d in the RCS, savers mstances). most 61996 29 service firms, including actuarial firms, employee employer, 69 percent say this advice was Chairman Dallas offered in Salisbury at the person, 23 above addr percent indicate thi ess, (202) 659-0670; s e-mail: salisbur advice was y@ebri.org offered All contributions automatically go into the professionally managed participating, It is likfinancial ely thassi coat th mstance pared wit is percen htage is slig 70 percent without a m htly hi22 32 25 gher than th atc e actu h. At the same ti al participation me, less rate, sinthan 4 in 10 ce some work20 workers are ers wh1 o do not workers are n retirement, it appears that workers, on average, have retire at age 6 ot currently5 s. At the same ti aving for retirem ment, 39 percen e, workers are reasonable ex t have less than $5 more than twice as li pectations about the leng 0,00 kely to expec 0 in savings, a t to work for th nd 3 of their 7 percent pay in Age confident As would be expected, worker confiden 100 40 36 31 38 39 33 38 35 31 33 33 ce in having e nough money for a comfortable retirement than $25,000 (53 percent). Approximately 1 in 10 workers each report total savings and investments of retire Since workers ment. More than 4 in 10 each are may have many years left before re very confident about havi tirement, it is not surprising that only ng enough money to pay for 6 percent each basic expenses Under $250 CitiStreet ,000 30% 23% Towers Perrin 36% often say Sim unlikely ilarly Calculation they find advice from as com , more than 2 in p.................................................................................................................... anies cut back on their defined benefit offerings. 10 say a financial professional to they would be very interested (22 percent) and half would be be most helpful (40 percent) (Figure 23). Less ............. somewhat 8 1997 33 Retirees are less likely than in 2005 to say they are very confident (12 percent, down from 20 percent) online, and account 13 percent say it was offered over the telephone (Figure 24). Similar to previo 25 us years, of the p Retirees with household articipate in an employer-spo inc no sored retiremen me under $35,00 t sav0 are ings plan more are no likely t aware than t ohose with hig f their eligibility. her income to report You or som aware of the Saver’s Credit (36 percen eone in your family has t), an effort by the federal government to boost participation in tax- have not done a retire increase retires wit ment. The average R retire h household income. Worker confiden ment (67 percent) as retirees ment needs calcul CS worker expects to retir benefit consulting firms, law firms, accounting firms, ation. are to have actually worked (27 ce also increas e at age 65 and spend 20 es with savings and investments and percent). years in retirement. One- $25, Workers Not at all Editorial B 000–$4oar 9,999 (1 d: Dallas L. Salisbury, publisher; Steve Blakely, 2 percent), $5 3 0,000– 2 $99,999 ( editor 12 pe 6 . Any rcent), $10 views expr 0,00 essed in t 13 0–$h 249, is publicati 999 (11 75 on an percent), and d those of the author 2 s should (44 percent), having done a Deseret Mutual Benefit Ad good ministrators job of preparing for retirement (42 percent), and being able t The Vanguard Group o pay for $250 report purcha,000–$499,9 s99 ing long-term care insurance or an ann19 17 20 uity. Older workers are more likely than younger In addition to problems with workers’ assumptions about retirement income from savings and defined often, the interested (51 percent) in a balanced fund (a m y report finding written material received fr ix of om stocks and bo work (15 percent) or advice fro nds with moderate risk). Em m family or friends ployed 1998 42 that Medicare will continue to provide benefits of equal value; however, confidence levels are considerably All contributi facing these pressures. In addition, retirees without inco 53 percent who say the The percentage of preretirem ons automatically y subsequently go inent inco to th received speci e lifecy me that workers cle fund fi m c reco e fro think t m mmen a defined benefit plan are m hed yations on will need is related to hous how they 13 should invest their ore likely ehold incom than e. Figure 6, Amount qualified retire not be 7 ascribed to the officers, ment savings plans by of Savings Needed for Retiremen trustees, mem essentially bers, or other sponsors of the E “mat t, by ching” Doing a Retirement Needs Calculation with federal tax dollars a perc mployee Benefit Research Institute, the EBRI Educ entage of m ........ 8 oney ation and large medical expenses that are Employer-provided retirement savings plans, such as 401(k)s, perform an important role in encouraging im proved health status. Others quarter expect to be retired confident • Some confidence levels not realistic: 38 39 44 33 33 32 30 31 32 35 34 for 20 more often confident –24 years (26 percent) The RCS continues to find that one-quarter of workers are are men (co , 8 percent think t mpared with women), hey will be retired for 25–2 married workers 9 years, $250,000 or Retirees Resp Dion vede rsi m nt fi os erd e were I (12 percent). Retirees are nv n estm ot1 2 ie nnt fo Ad rmed o visof t rs he relative cost somewhat differences am5 5 less likely than workers to say their t ong these options. 79 8 otal household medical expenses (42 percent). In addition, more than 3 in 10 each are somewhat confident (40 percent $500 workers to say the,000–$999,999 y have bought a long-term care policy21 23 20 . (13 percent) m workers are l benefit plans, the large maj ost helpful. ess likely to e One in 10 xpress interes ority of workers do not or fewer indi t (11 percent cate that their most helpful sources of information are know the age at which the very interested, 50 percent y can receive full Social somewhat interested) in an and investment management firms. 1999 48 higher than t Research Fund, or h their ose staffs. measured Nothin in 19 g herein is to be co 96 (very confident inc nstrued as an attemrpeased fro t to aid or him nder 5 the adoption percent in 1996 to of any pending le 12 percent in 2006; gislation, regulation, money, only 13 percent implemented all of the recommendations. Instead, 57 percent implemented some of All contributi those with such incom Those with less than $35,000 in ons autom e to atically say the go i y are now n household incom to the balanced fund much more e ar concerned about t e more likely than higher-incom heir financial future. 11 e workers to think their contributed not covered b Not all workers who have saved for retire by eligible indi y insurance viduals. The proporti18 27 31 on ment ar aware of the Saver’ e currently saving for this purpose. Less than s Credit decreases to 23 one-quarter 1 two- Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey. retire and 15 ment sa Financi percent think the very vings. Eligible workers ar al E confident about t ngines y will live in retirem heir financial secur e 7 much m ent for 30 ore ity in retirem likelyy to save ear s or m ent (24 percent), while m throug ore. At the same ti h a plan offered b me, 6 percent think they o yre than 4 in their employ 10 are er Retirees (compared with those no t married), and homeowners (compared with nonowners). savings are less than $25, Figure 7, Pla 8 nned and Act 0u 00 (42 al Retirement Age percent) and m .................................................................................... ore likely to say they have $250,000 or more (21 percent). .... 9 $1 m about basic expenses, 35 percent about their retiremen illion–$1.49 million 8 t preparation, 32 11 percent about medical 5 expenses). or interpretative rule, or as legal, accounting, actuarial, or other such professional advice. input fr investm Security om their spouse (10 percent), ne e retir nt like a ement benefits without a reduction f money market fund. wspapers or Expressed interest in the lifecy magazines (8 percent), or early retirement. Notwithstanding cle fund and the Internet (5 percent). No decreases as the past seven y age increases. ears 2000 53 Respondents were not informed of the relative cost differences among these options. somewhat confident from 35 percent to 50 percent). Worker confidence in the value of Medicare benefits Don’t know the reco mmendations, and 30 percent did not implement any. Workers with household income of at least 4 among those with househo thirds of workers report that they income in retirement will n ld incom eed to equal or exceed their e and/or their spouse less than $35,000. are currently preretirement incom saving for retirem e for them ent (64 percent). This to live comfortably in You (or your spouse) are unable to Today, EBRI is recognized as one of the most Genworth Financial American Savings Education Council (ASEC) (82 percent) t will live less somewhat han workers are overall to have an i than 10 confident (44 percent). How years in retirement, 25 percent th ndiv ever, at least idual retirem ink theso y will m ent account (I e of those who say live 10–19 RA) in which the years, and 19 pe they are ve yrcent say ry have confident they Very These findings are si milar to some other estimates of American household assets. Quantifiable data from Like workers, retirees are least likely to express confidence about having enough money to pay for long-term $1.5 m illion or more 10 16 6 of individual benefit statements being mailed to the U.S. population from the Social Security Administration, mor EBR e than 2 percent of workers who have saved for re I Issue Brief is registered in the U.S. Patent and Trademark Office. tire ISSN: 0887 ment find any -137X/90 of the other tested sources of infor- 0887 -137X/90 $ .50+.50 Source: Employee Benefit Research Institute and Math2001 44 ew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey. Figure 8, Cal also remains above 199 culated Life Expectancy 6 levels (ve f ry or Workers, by Gender confident increased fro ............................................................ m 3 percent in 1996 to 5 percent in 2006; 10 $35,000 are retirement. On the other more likely th hand, those with higher inco an lower-income workers to say me are thm at the ore ir em apt to thi ploynk t er offers them hey will need 85 percent or access to this type Sources of Retirement Income percentage dipped slightl Since em Hewitt Current plan ployer-sponsored retirement plans are effect participants are y to 58 percent in 20 more likely than nonpa 04, but has otherwise r ive at sti rticipants to express interest in lifecy Charter Pa mulat rtner Particip ing fam emained level ily savings, enhanc an since the RC ts cle f ing these S first unds and work for six months or more 16 30 34 18 1 contributed ( are unable to estimate how long t 36 percent). In addition, e hey m will ploy live. er-sponsored plans account for a significant proportion of may be overconfident. Twenty-two percent of very confident workers are not currently saving for the 200 Confidence in Other F confident 4 Survey of Consu 7 14 19 17 26 28 27 27 18 21 19 m inancial Aspects of Retirement er Finances (conducted by the U.S. Federal Reserve Board) found that median care. More than 2 in 10 say they are very confident (22 percent), while one-third are somewhat confident Don’t know/Don’t remember authoritative and objectiv 9 e resources in the world on 6 11 mation to be almost half of workers believe they most helpful in their retirement savings and investm will be eligible for unreduced benefits sooner than the ent decisions. y actually will 2002 38 somewhat confident from 20 percent to 29 percent). Income Nee of investm Retirement Confi d ent advice. s in Retirement dence or Overconfidence balanced funds. Nevertheless, less of their preretire IBM ment income to live comfortably more than 6 in 10 nonparticipants say . The incom 2 AARP e re t place hey woul ment ra d be interested in each of tio mentioned by workers plans would measured it in 20 Many Did wor you be likel k re ers adm this as a y 01. a to i y be basing their expe ncrease personal savings. Auto pass-along? Stayctations a ahead of bout emm plo where their retirement income will co ay tically ee benefit enrolling wor issues withk your ers into a pl own subscr an is a way me fro iption to m of EBRI on Figure 9, Worker and Retiree Esti You (or your spouse) have to retire mated Chances of Living Until Specific Ages ................................ 10 workers’ Workers planning t retire retirement, 39 percent have less than $50,000 in sav ment savings. Seven in 10 plan partic o retire at earlier ages tend to exp ipants say ect the that half or m ings, and 37 percent have not done a retirem y will spend longer in ore of their household’ retirement than those s total ent Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey. ( m Somewhat idpoint) le (33 percent). While professionall The 2006 RCS continues t vel of household assets of Am Again, confidence has y managed accounts are not the auto o find that wo remained fairly stable over time. eri rker confiden cans is $172,900. ce is highest in havin matic invest This includes the value of the primary ment option g enough m most likely oney t to o pay for generate (48 percent). One-third incorrectly think they will be eligible for unreduced benefits at age 65 (31 percent of 2003 43 Issue Brief Investment Co for onl mpy an $89/ y Inye stitu ar telectro e nically e-mailed to you or $1Fid 99/elity Inv year printed estmen and mai ts led. For more information The likelihood of finding a financial professional Even knowing that the Workers who do not currently have access to pr y must save emplo more now to affo yee benefit issues—health car m ofessional investm o rd it, 6 st helpful is hi in 10 wo gher am rkers say ent advice through t ong e, pensions, and the workers with household y would realistically heir employ er “defaulting” workers into t these fund options. Interest in lifecy appears to have little relationship t Not surprisin While a majog rity of Am ly, the li he savings option, and keli ericans know who runs t hood o of havi the cle f am unds and n ount the g saved work bala y ers generall t h for retirem e Medicare sy hnced funds increases as hou ink they need to accum ent am y express favorable opini stem ong b , soo me appear to be confused. th work ulate for retirement, even when sehold income increases. ers and retirees is ons about shaky two or m assumptions. While ore years earlier than more than 6 in 10 retirees cite guaranteed sources, such as Social Security retire who plan to ment sa needs calcula vings are in their current em retire at older ages. Howev tion. ploy er, er’ me s pla n and n (70 wom percent). en provide similar estimates of the length of time hom interest, those workers who are intereste basic expenses during retir confident e, which had a median value of 36 34 34 34 33 38 31 36 39 37 44 ement, and lowest in bei $160 d,000 f in this ty or those pe ng of able to afford medical or long-term who owned a fund appear m hom ore likely e. to be loy a care l. Al expenses most half of Figure 10, Worker Preferences for Standard of Living in Retirement.................................................. 11 all workers), and 2 in 10 think they will be eligible even before age 65 (17 percent). More than 2 in 10 about subscriptions, visit our Web site at www.ebri.org or complete the form below and return it to EBRI. 2004 42 J.P. Morgan Chase & Co. InCharge Education Foundation, Inc. prefer a retirement standard of living that is the same (47 percent) or higher (12 percent) than that of their income of at least $75,000 would be m household inc ost likely to ta ome and expectations of inco (co ke advantage of such advic mpared with lower-inc me froome workers) m a edefined benefit plan are taken into account. if it were and those who have com made available in-person rather than online pleted college (43 percent) and an em different features of an automatic plan (Figure 26). strongl When asked to identify This am y relat ount t ed to household incom ends to decrease as age increases. Wo ployer-provided the organization that runs the epension (20 . The proport I percent), as thei nion particular, 7 rkers age 45 and older are more likel Medicare sy saying the in 10 r largest source of income yste have saved for m em , two-thirds of workers (67 percent) ployed workers say the retirement also increases y tha in retire n y y favor a ounger ment, n as expected 11 30 33 25 1 Overconfid they will spend in retirement as well as si To boost participation, emplo ence? yer plans could be milar expected further enhanced b ages at retirement, despite the fact that women, on y adding automatic options. A • Auto-enrollment well received: To boost participation, employer plans could be further enhanced by (Figure 19). those say Not too Older workers tend to report higher am ing they More than one-third of workers are are very interested in a professionally m economic security ounts of assets. very confident the a While nearly three-quarters of workers under age .naged ac ycount indicate that this opt can meet their basic expenses in ion would be Overall Retirement Confidence workers say they do not know when they will be eligible to receive full benefits from Social Security (22 per- MassMutual Financial Group MetLife 2005 42 (co Figure 11, working m or over the tel pared wiNa ym ear Percentage of Preretiremen e s (Figure 10). th those havi ephone. Mor ng less education). On t About e specifically 4 in t Income Needed in Retirement 10 indicate they would , 3 in 10 sa he other hand, w y they wo give uld o up som be rkers with less than $25,000 in assets ................................................ very e likely comfort in retirement in to use in-person investm 11 ent education levels rise or hea Although there is a weak relationship among worker lth status improves. In addition, m s between the am arried workers and retirees ount of replacement income they are more likely tha n e alm workers to thi mploy and three-quarters of retirees (75 percent) correctly ost half of workers are er automatically nk they need to accu enrolling work planning m to re ulate less than $100,000 for retir ers into a plan ly on their ow and setting u n n savings for ame the federal governm p contrib their largest source (Figure 14). ement. On the other hand, utions throu ent. Two in gh pay10 roll ded those under workers uction You lose your home and/or most of majority average, live longer than m Given the conflicting responses that workers provi of e adding aut mployed workers favor automatic en omatic options. en (Figure 8). A majority Half of bot of rollment (69 percent), autom employ h men and women providin de ed with respect t workers favor autom o confidence atically g a this inform tic increasing the and retire enrollment (69 percent), ation expect to ment 35 have total retire m confident ost effe ment (35 percent), while al Despite continuing lack of ctive in helping the savings and i 36 33 31 33 27 20 30 22 26 26 22 nvestm m achieve t me o preparation and recen nts less than $25, st half are heir objectives somewhat 000 (46 percent). In com confi t employ (73 percent versus 46 pe dent er announcem they will do s parison, 2 ents orcent of older (47 about cutbacks in retiree percent). Slightl 6 percent of those workers), on y very e- cent). (In reality, the Social Merrill Lynch Security normal retirement age varies from Nationwide Fi age 65 to age 67, by nancial Services year of birth.) 2006 42 (co exchange for lower levels m advice if it were offered by their em pared wiOrganiz th higher-asse ation of saving in t workers) and those under tplo heir working yer (30 percent), and years (39 age 45 (compared with older workers) are percent). 4 in 10 would be somewhat likely to do so (42 more likely (34 percent think t those not m (20 percent) and 8 hestrongly y wil arried to have set l need and he favor, percent of retirees identif 35 percent alth status, money so asid mewhat many e. Other grou wor y favor). The the stat kers ma e governm ps y of workers m y be failing to take heal are alm ent, while sm ost as likely to favor a feature that ore likely all p th care costs sufficiently int to have saved for retire ercentages specify private ment o age 35 are Fourteen percent each say more apt than older workers to believe th they expect that money from ey will need $1 m a work-place retire illion or m ment savings plan, ore. Among those with such as a percentage of salary your possessions due to an contributed when an increase in pay is received (65 percent), and automatically Figure 12, live until at le preparation, Availabilit automatically many ast age 85, and one-quarter workers y of increasing the percentage Employ may er-Pr be overconfident ovided H expect to liv ealth Insurance Coverage in Retirem of salary about their retirement security e until at least age 90. According to t contributed when an increase in . A general public opi ent .................. pay is received he 2005 OASDI 12 nion quarter of workers age 55 and older cite asset fewer are confident that the interested in a lifecycle fund feel that t y are doing a ype of fun good s of $250,00 job d is prep the m aring financially for their re 0 or m ost effective optio ore (26 percent versus 10 percent of n, and o tirem nly 1 ent, with one-quarter 5 percent of those younger Not at all benefits, Americans continue to express a fair degree of confidence about their financial prospects in Source: E MFS Retirem mployee Benefit Research ent Services, Inc. Institute and Mathew Greenwald & Associates, Inc., Prud 1994– ential Retirem 2006 Retiremen ent Confide t nce Surveys. Only 19 percent of workers are able to give the correct age at which they will be eligible for full to report fin a account when estim percent). Fewer workers Addre dsis ng advice fro ating their needs. Consistent with RCS findings mare likely family and to take advantage of friends most helpful in m investment advice if it aking t from heir retirem previous y is provided ent savings and invest- ears, work online (14 ers are percent as 401(k), would autom household include those health insurance co or an inc aIRA will provide their largest share. Two o tically me of $50, age 35 and ol increase the perc mpanies (6 000 or m der (co percent of workers, 3 percent of retirees) ore, workers who do a m en pared with tage of salary cont young in 10 say er calculation are m ributed workers), homeowners (co it will come from when they receive a rais . In addition, 10 percent of workers ore likely than th other personal savings or mpared with no e ( o32 percent, 33 se who do no nowners), t unexpected event 6 23 42 28 1 investing con TTrustees R survey he addition of th such as the RCS cannot tributio eport, a 65-y e phrase “and/or ns for ear-old m the em your spouse” to the question wo ploy provi an today can expect eede a definitive answ (59 percent). rding Plan participants and no foto live until age 82, while a 65-y r maer to whether workers are preparing adequately rried respondents starting in 199 nparticipants are equally 9 is responsible ear-old for wo appr moxim an can ately for (65 percent), and automatically investing contributions for the employee (59 percent). Plan workers). As one m very very confident interested in a balanced fund confident (25 percent) 11 ight suspect, total savings and 9 11 12 and half say somewhat it would be m confident (50 percent). Fewer workers are co i9 n ovest st likely to he ments increase 7 lp them 8 11 11 12 13 sharply reach with household incom their retirement savings nfident the ey an will d retire Milli ment (Figure 17). man USA, Inc. One-quarter of workers are very confident they will have enough m State Farm Insurance Companies oney to live 5 retirement benefits, and 9 percent believe they will be eligible later than they actually will be. The 3 Source: E ment decisions. very m likely ployee Benefit Research , 36 percent Institute and Math somewhat likel ew Gr y) eenwald & or by telephone (9 percent Associates, Inc., 2006 Retire very ment Co likely nfidence Survey , 25 percent . somewhat likely). 4 to 5 per likely workers curre centage points of the incr to expect to have acc ntly participating in ease between 1998 and 1999. ess to e a work-place retire mployer-provided hea ment savings lth insurance coverage in retire plan (compared with those not ment (37 percent) as invest percent). Six in 10 to estim and 14 mC e ate thints (typerce/Sta 20 percent). at theyten/Z t of retirees say IP em need h ployed workers favor autom In contrast to igher am theounts. y do retirees, a not know who ppr atic oxim investment of contributi runs Medicare. ately one-third of workers expect their largest ons (23 percent, 36 percent). Source: E likely expect to live until age 85. retire to favor each of these automatic f mployee ment; however, the RCS does provide some participants and nonpartici Benefit Research Institute and Math pew Greenwald ants eatures. are equally & Associates, Inc. stro ling indications. First, workers who are kely to , 1 favor each of these auto 996 -2006 Retirement Confidenm ce Sur atic features. veys. v ery confident goals. with education. In addition, hom have enough money to meet medical eowners (co expenses (19 percent mpared with nonowners) and very confident, 42 pe workers who have done a rcent somewhat confident) or Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 or Fax to: (202) 775-6312 Employee Benefit Research Institute EBRI EBRI EBRI IssuIss Iss e B u ur e B e B ief No. r rief No. ief No. 292 292 292 • Ap • • ril 200 Ap April 200 ril 200 6 • 6 6 w • •ww.ebri.org w © 2006 ww.ebri.org EB RI • www.ebri.org EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI Iss Iss Iss Iss Iss Iss Iss Iss Iss Issu u u u u u u u u uIss Iss Iss Iss Iss Iss Iss Iss Iss Iss Iss e B e B e B e B e B e B e B e B e B e B u u u u u u u u u u ur r r r r r r r r r e B e B e B e B e B e B e B e B e B e B e B ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. r r r r r r r r r r rief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. ief No. 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 292 • • • • • • • • • • Ap Ap Ap Ap Ap Ap Ap Ap Ap Ap • • • • • • • • • • • ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 Ap Ap Ap Ap Ap Ap Ap Ap Ap Ap April 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 ril 200 6 6 6 6 6 6 6 6 6 6 • • • • • • • • • • 6 6 6 6 6 6 6 6 6 6 6 www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb • • • • • • • • • • • www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb www.eb ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.org rg rg rg rg rg rg rg rg rg ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o ri.o rg rg rg rg rg rg rg rg rg rg rg © 2006, Employee Be 2121 K S nefit Rese trar eet, NW ch Institute
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20037 rights reserved. EBRI Iss ue Brief No. 292 • April 2006 • © 2006 EBRI • www.ebri.org 15 17 27 24 14 21 25 23 12 26 11 18 20 22 13 19 10 16 28 5 8 3 9 2 1 7 4 6 phone (202) 659-0670
Fax (202) 775-6312 EBRI Notes • October 2003 15 www.ebri.org The premier organization

Volume 292

Pages 28

EBRI Issue Brief

Ruth Helman

Craig Copeland

Jack VanDerhei

Retirement