According to the Global Benefit Attitudes Survey, released by professional services firm Towers Watson, employees are especially worried about the affordability of health care in retirement, and significant numbers have been forced to cut back on spending and plan to delay retirement, many until age 70 or later.
The nationwide survey of 5,070 full-time employees finds that nearly half of respondents (46%) are satisfied with their current finances, an increase from 26% in 2009. However, nearly six in 10 (58%) remain worried about their financial future. Employees’ confidence in their ability to retire has increased since the financial crisis, with nearly one-quarter (23%) of employees saying they are very confident in their income sufficiency for the first 15 years of retirement. However, confidence levels decrease when employees look farther ahead, with only 8% being very confident they would have adequate income 25 years into retirement.
“Employees might be on firmer financial footing now than they were five years ago, but many remain nervous about their finances and prospects for a secure retirement,” says Shane Bartling, senior consultant at Towers Watson, based in New York. “This is especially true for older workers who are likely better positioned to assess their retirement income than workers overall. The financial crisis hit workers age 50 and above particularly hard, with the stock market fall creating a huge dent in their retirement savings and their confidence levels.”
The survey also shows that employees of all ages are worried about health care costs and public programs. Only two in five employees believe they can afford any medical expenses that will arise over the next year. These concerns are more pronounced for mid-career and older employees, as well as those in poor health. In addition, more than half of employees (53%) are concerned they will not be able to afford the health care they need in retirement. Also, 83% of employees believe Social Security will be less valuable in the future, and 88% have similar fears about Medicare.
Survey results indicate that employees are taking steps to address their financial concerns and have made it a priority to pay off debt, save for retirement and otherwise exert more control over their household budgets. More than half of employees (56%) are spending less and postponing big purchases. Employees admit they need to save more for retirement, and are becoming more active and interested in retirement income planning. Just over half (51%) review their retirement plans frequently. The survey notes that saving for retirement is cited as the number one financial priority for all employees age 40 and older.
“Employees are getting the message that their future health care costs should be an integral factor in their retirement planning. Escalating health care costs continue to claim larger shares of paychecks. And workers’ pessimistic outlook for Social Security and Medicare adds not only to their expected financial burden but also to the age at which they can retire,” says David Speier, senior consultant at Towers Watson.
With many employees expecting to fall short on their retirement savings, survey findings show that nearly four in 10 employees plan on working longer—an increase of 9% since 2009. A majority of these employees expect to delay retirement by three or more years, and 44% plan on a delay of five years or more.
The profile of those delaying retirement tends toward the disengaged, less healthy and more stressed. These findings suggest a higher average retirement age in the future, according to Towers Watson. In 2009, 31% of workers planned on retiring before 65, and 41% planned on retiring after 65. According to the 2013 survey, only 25% plan on retiring before 65, and half expect to retire after 65. One in three employees either does not expect to retire until after 70 or doesn’t plan to retire at all.
“Employers and employees are both facing increasing retirement pressures,” says Bartling. “Employers understand that they have a role to play in helping their workers plan and save for a secure retirement. Today’s employees are considerably more engaged, and are looking to their employers for more information about health care costs and the value of their retirement programs. The proliferation of tools, including mobile apps, also represents an opportunity for employers to help their employees plan for a successful retirement.”
The survey, which examined employees’ attitudes about health and retirement benefits, was conducted in 12 countries between July and September 2013. The survey was completed by 22,347 employees, including 5,070 full-time workers in the United States, representing all job levels and major industry sectors.
More information about the survey can be found here.