EBRI Press Release

EBRI and The Principal Release Retirement Survey Focused on Iowans' Views

Dec 20, 1999
 

Iowans expect to work longer, but do Americans have a false sense of confidence?

(WASHINGTON AND DES MOINES)--With weeks to go before the first-in-the-nation Iowa presidential caucuses and the spotlight focused on Iowans' views, the Employee Benefit Research Institute (EBRI) and the Principal Financial Group today released a new study highlighting Iowans' attitudes toward their retirement security.

Retirement issues have played a significant and growing role in the campaign discussions, as demonstrated by federal efforts and candidate proposals to preserve Social Security and to expand employer-sponsored and personal savings for retirement.

David J. Drury, chairman of the Principal Financial Group, said: “Planning for retirement can seem complicated and sometimes overwhelming, but retirement security is an issue that does not discriminate. The ongoing trend of personal savings rates hitting all-time lows illustrates the alarming need to address the issue and head off a nationwide personal retirement crisis affecting the full stratum of American society. Surveys such as the Iowa Retirement Confidence Survey help us identify what motivates Americans to seriously engage in retirement preparations, and allow us to better develop educational outreach programs for the workforce.”

Dallas Salisbury, EBRI president and CEO, said the survey results provide a valuable window into Iowans' views on an issue of vital national concern. “We conducted this survey to bring a critical issue into sharp focus during the Iowa caucuses as candidates offer solutions to the nation. We urge policymakers to encourage meaningful changes that will preserve the Social Security system as a foundation and enhance savings opportunities for employers and their employees, particularly at the small employer level where most Americans are employed and where a minority of firms offer plans today.”

The results of the 1999 Iowa Retirement Confidence Survey (Iowa RCS) show that workers in Iowa are more likely than those elsewhere in the nation to say they expect to retire at age 65 or later (55 percent in Iowa, compared with 47 percent of the nation's workers). Five percent of workers both in Iowa and the nation expect they will never retire. Retirees in Iowa are less likely than those nationally to retire earlier than age 65 (62 percent in Iowa and 71 percent in the nation).

According to the Iowa RCS results, many people who retired early did not do so by design--36 percent of retirees in Iowa and 43 percent of retirees nationally say they retired earlier than planned. Fifty-five percent of retirees in Iowa say they retired about when they planned and 46 percent of retirees in the nation say they did so. Iowans are more likely than retirees nationally to have retired approximately as planned.

In addition, many who retired earlier than planned did so for negative reasons. Iowa's retirees who left the work force earlier than expected say they did so because of health problems or disability (49 percent of Iowan retirees, compared with 40 percent of the nation's retirees), or retired earlier than planned due to downsizing or closure (23 percent in Iowa and 14 percent in the nation), family reasons (8 percent in Iowa and 14 percent in the nation), and other work-related reasons (6 percent in Iowa and 12 percent in the nation). Only a small proportion say they retired because they found they could afford an early retirement (17 percent in Iowa and 14 percent in the nation).

The Iowa RCS found that a significant majority of Iowans are confident about their retirement income prospects, with 20 percent of workers reporting they are very confident of having enough money to live comfortably in retirement and 50 percent reporting they are somewhat confident. By comparison, similar proportions of American workers report they are very confident (24 percent) or somewhat confident (47 percent) of having enough money for a comfortable retirement . However, 29 percent of Iowans said they are not confident they will have enough money to live comfortably throughout their retirement years, compared with 28 percent of Americans.

In addition, 80 percent of workers in Iowa say they have established an investing or savings program for their retirement and 75 percent say they are personally saving for retirement. Nationally, 74 percent have established an investing or saving program and 70 percent are saving. Iowans are more likely than workers nationally to say they have established an investing or savings program, but the two do not differ in terms of overall proportions saving for retirement.

False Confidence?

However, there are several reasons to believe that many individuals are falsely confident. Barely half (51 percent of workers in Iowa and 49 percent of workers in the United States) have tried to determine how much they will need to save by the time they retire, and only a third (35 percent of Iowa workers and 36 percent nationally) have thought about insurance coverage for long-term care or nursing home needs. Also, just 17 percent of workers in Iowa and 16 percent of those nationally report having accumulated $100,000 or more for retirement. In addition, significant number of people in Iowa and nationally consider themselves to be savers rather than investors, and report risk-adverse investment behavior.

The Role of the Employer

Survey results illustrate the major role that employers play in ensuring adequate retirement preparation, EBRI's Salisbury said. "Most workers reporting that they expect money provided by their employer will be either a major source or minor source of income in retirement. We found that 46 percent of workers both in Iowa and in the nation expect that money they put into a retirement plan at work will be a major source of income."

Further, the availability of a retirement plan at work is credited by a significant number of people as a motivator to save (43 percent in Iowa and 48 percent in the nation), while the lack of a plan is cited by nonsavers as a major reason they do not save (31 percent in the nation, but only 14 percent of workers in Iowa). Nonsavers nationally are more likely than nonsavers in Iowa to say that the lack of a retirement plan at work is a major reason why they are not saving for retirement.

Among those who received some sort of educational materials from their employer, 12 percent of workers in Iowa and 21 percent of workers nationally say these materials led them to resume saving for retirement.

Other Highlights of the Iowa RCS:

  • Few respondents are aware that the Social Security normal retirement age (to qualify for full retirement benefits) is currently in the process of being phased up, from age 65 to 67. A majority of workers expect to reach full eligibility sooner than they actually will (58 percent of workers in Iowa and 59 percent of workers in the nation). Many of these workers incorrectly expect to be eligible for full benefits at age 65 (41 percent of those in Iowa and 37 percent of all workers).
  • While only 25 percent of retirees in Iowa and 29 percent of all retirees say they have worked for pay since they retired, a larger share of workers indicate they expect to work for pay in retirement (68 percent of workers both in Iowa and the nation). Both workers and retirees are most likely to identify enjoying work and wanting to stay involved as a major reason for working in retirement.
  • Workers, more so than retirees, also say major reasons they will work in retirement are to keep health insurance and other benefits, to have money to make ends meet, and to be able to afford extras. Workers not confident they will have enough money for their retirement and those with lower household incomes are particularly likely to identify these other reasons. Workers nationally are more likely than those in Iowa to say a major reason they expect to work in retirement is to try a different career.
  • Today's retirees are most likely to rely on Social Security or employer-provided money as their most important source of income in retirement. Only 16 percent of Iowa retirees and 18 percent of retirees nationally find that their personal savings are their most important source of income.
  • In contrast, 47 percent of current Iowa workers and 49 percent of all current workers expect personal savings to be their most important source of income in retirement. Twenty-three percent of workers in Iowa and 20 percent of those in the nation expect to rely most on employer-provided money. Only 10 percent of Iowa workers and 12 percent nationally expect Social Security to be their most important source of income.
  • Some workers are confident that Social Security and Medicare will continue to provide benefits of equal value to what they provide today. Twenty-eight percent of workers in Iowa and 30 percent of all workers say they are very or somewhat confident that Social Security will continue to provide benefits of equal value.

Established in 1879 and a member of the Fortune 500 and Fortune's Most Admired Companies, the Principal Financial Group is a leading provider of a wide range of financial products and services globally to businesses and individuals, including retirement and investment services, life and health insurance and mortgage banking. The Principal provides administrative services to more 401(k) plans than any other provider in the United States. Serving more than 10 million customers worldwide, the Principal Financial Group has more than $105.8 billion in assets under management.

Founded in 1978, EBRI's mission is to contribute to, to encourage and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, DC. EBRI does not lobby and does not take positions on legislative proposals.

 

IOWA RCS Methodology

The Iowa RCS is based in part on the ninth annual Retirement Confidence Survey (RCS), which gauges the views and attitudes of working and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. 1999 marked the first year of an oversample of individuals in Iowa.

The survey of all Americans was conducted within the United States between Jan. 4 and Feb. 28, 1999, through 20-minute telephone interviews with 1,002 individuals (751 workers and 251 retirees) ages 25 and older. In addition to the 1,002 Americans in the base survey sample, 733 interviews were conducted with working and retired Iowans (501 workers and 232 retirees). The survey of Iowans was conducted between Sept. 22 and Oct. 22, 1999. Random digit dialing was used to obtain a representative cross-section of the U.S. and Iowa populations and interview quotas were established by sex of respondent to reflect the actual proportions in the population.

In theory, a sample of 751 workers in the United States yields a statistical precision of plus or minus 4 percentage points (with 95 percent certainty) of what the results would be if the entire U.S. working population ages 25 and older were surveyed with complete accuracy. Likewise, a sample of 501 workers in Iowa yields a statistical precision of plus or minus 4 percentage points (with 95 percent certainty) of what the results would be if every member of the working Iowa population ages 25 and older were surveyed with complete accuracy.

A sample of 251 retirees in the United States yields a statistical precision of plus or minus 6 percentage points (with 95 percent certainty) of what the results would be if the entire U.S. retired population were surveyed with complete accuracy. Likewise, a sample of 232 retirees in Iowa yields a statistical precision of plus or minus 6 percentage points (with 95 percent certainty) of what the results would be if every member of the retired Iowa population were surveyed with complete accuracy.

There are other possible sources of error in all surveys, however, that may be more serious than theoretical calculations of sampling error. These include refusals to be interviewed and other forms of nonresponse, the effects of question wording and question order, and screening. While attempts are made to minimize these factors, it is difficult or impossible to quantify the errors that may result from them.

The Retirement Confidence Survey is co-sponsored by the Employee Benefit Research Institute (EBRI), a nonpartisan, nonadvocacy public policy research organization; the American Savings Education Council (ASEC), a partnership of more than 250 private- and public-sector institutions dedicated to raising the public awareness of what is needed to ensure long-term personal financial independence, and a part of the EBRI Education and Research Fund; and Mathew Greenwald & Associates, Inc. (MGA), a Washington, DC-based market research firm.

The 1999 RCS data collection was funded by grants from 24 public and private organizations. Data collection by MGA for the 1999 Iowa Retirement Confidence Survey was underwritten by the Principal Financial Group. Data analysis was conducted and materials were prepared by Pam Ostuw, Danny Devine, and Bill Pierron of the Employee Benefit Research Institute (funded by EBRI). RCS materials, including the Iowa RCS, and a list of underwriters may be accessed at the EBRI Web site: or at The Principal's site, .

The Retirement Confidence Survey and Retirement Readiness Rating are trademarks of the Employee Benefit Research Institute.

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