Expectations about Retirement Are Changing

The age workers plan to retire continues to see a slow upward trend. 

In particular, the percentage of workers who expect to retire after age 65 has increased, from 11% in 1991, to 17% in 1997, 18% in 2002, 24% in 2007 and 37% in 2012, according to the 22nd annual Retirement Confidence Survey (RCS) by the Employee Benefit Research Institute (EBRI). 

The percentage of workers planning to work for pay in retirement in the 2012 RCS is 70%, compared with just 27% of retirees who report they worked for pay in retirement.  

Almost all retirees who worked for pay in retirement in the 2010 RCS gave a positive reason for doing so, saying they did so because they wanted to stay active and involved (92%) or enjoyed working (86%).   

However, the percentage who report working solely for non-financial reasons is small. Ninety percent identify at least one financial reason for having worked, such as wanting to buy extras (72%), a decrease in the value of their savings or investments (62%), needing money to make ends meet (59%), or keeping health insurance or other benefits (40%).


Sources of Income in Retirement  

Although the vast majority of retirees (91%) report that Social Security provides a source of income for their and their spouse’s retirement (69% say it is a major source of income), workers and their spouses continue to expect to piece together their retirement income from a wide variety of sources. Seventy-nine percent of workers expect Social Security to be a major or minor source of income in retirement, but they believe that personal savings will also play a large role.   

Roughly two-thirds each say they anticipate receiving retirement income from an employer-sponsored retirement savings plan (72%), an individual retirement account or IRA (64%) or other personal savings and investments (62%). Seventy-nine percent expect employment to provide them with a source of income in retirement, 56% expect to receive income from an employer-sponsored traditional pension or cash balance plan and 45% expect to receive income from a payout annuity.   

In contrast to worker expectations, retirees are less likely to rely on any form of personal savings or on employment for their income in retirement.  

Workers’ expected sources of income in retirement have changed slightly over time. Although virtually all retirees continue to report receiving income from Social Security, the percentage of workers expecting income from this source has declined from 88% in 1991 to 79% in 2011 and 2012. The percentage of workers expecting to receive benefits from a defined benefit plan also decreased from 70% in 2002 to 56% in 2012.   

At the same time, the percentage of workers expecting to receive income from employment increased from 72% in 1991 to 79% in 2012.  

It should be noted that although 56% of workers and/or their spouse expect to receive benefits from a defined benefit plan in retirement, only 33% report that they and/or their spouse currently have such a benefit with a current or previous employer.  

Worker responses suggest that they will be about as likely as current retirees to purchase a financial product or select a retirement plan option that pays guaranteed income each month for life. Twelve percent of workers say they will be very likely to purchase or choose such a product, compared with 12% of retirees who report they bought this type of product or chose this plan option when they retired. Another 34% of workers indicate they will be somewhat likely to buy or choose a guaranteed income product. 

The survey was conducted in January 2012 through 20-minute telephone interviews with 1,262 individuals (1,003 workers and 259 retirees) age 25 and older in the U.S.  

More information is available at http://www.ebri.org.