Data & Research April 12, 2017

Non-Retired Americans Anxious About Retirement Planning

Many plan to make financial sacrifices in retirement, a survey finds.
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Worries about health care costs and Social Security uncertainty have many Americans planning to make financial sacrifices in retirement, according to a survey conducted for the American Institute of CPAs (AICPA).

The survey found that only 46% of non-retired Americans are confident they will reach their retirement goals, compared with 49% who are not confident (29% not sure, 20% don’t think they ever will). Only 5% of non-retired Americans report they have already reached their retirement goals.

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This lack of overall confidence tracks with anxiety about the financial aspects of retirement—with two-in-five non-retired Americans (42%) saying they are either very anxious (14%) or somewhat anxious (29%). When these Americans were asked the specific cause of their anxiety, health care cost (71%), health care uncertainty (68%), affording everyday expenses and bills (67%), Social Security uncertainty (62%) and uncertainty over tax rates (52%) were cited. In addition, figuring out how much money will be required in retirement (70%) and the overall difficulty of planning for retirement (54%) are causing anxiety for a substantial percentage of non-retired Americans.

Overall, non-retired Americans are more likely than those who are currently retired to plan on making at least one financial sacrifice in retirement (92% vs. 72%). Those sacrifices include:

  • Working full-time longer than expected (45% non-retired vs. 11% retired);
  • Working a part-time job (43% vs. 17%);
  • Moving to a less expensive city or town (40% vs. 22%);
  • Forgoing medical care or treatment (28% vs. 14%).
NEXT: Sources of retirement income

“Working throughout your life was once a reliable route to a comfortable, financially secure retirement. Over the years, Americans have been asked to take on more responsibility and become more self-sufficient when it comes to their retirement planning,” says Greg Anton, chair of the AICPA’s National CPA Financial Literacy Commission. “We’ve found that today, even Americans who say they’ll reach their financial goals are anticipating a more active ‘retirement-lite’ that involves working and making financial sacrifices.”

The traditional "three-legged stool" model of retirement planning involves Social Security, a pension and personal savings, including employer-sponsored defined contribution (DC) retirement plans and individual retirement accounts (IRAs). The survey found that, among those currently retired, the model holds up well, with these Americans citing Social Security (61%), pension plans (36%) or cash or savings accounts (25%) as their top sources of income in retirement.

However, for non-retired Americans, anxiety over Social Security and a sharp decrease in company pensions may have led to an increased emphasis on personal savings. Overall, for non-retired Americans, the percent who anticipate relying upon Social Security (48%) or a pension plan (17%) as one of their top two primary sources of income differs significantly, with a more likely dependence on cash or savings accounts (39%). And non-retired Americans are more than three times as likely as those who are retired to say they expect to rely upon a 401(k) (43% vs. 14%) as one of their two primary sources of income during retirement.

Harris Poll conducted the survey within the United States between March 24 and 27, 2017, among 1,018 adults (505 men and 513 women ages 18 and older) including 650 adults self-identified as “non-retired” and 322 as “retired.”

Compliance April 11, 2017

Attorneys Move to Send Schwab Self-Dealing Suit to Arbitration

“The court should compel individual arbitration of [the plaintiff's] claims and, on that basis, dismiss the lawsuit, or stay the litigation pending the outcome of individual arbitration,” the attorneys conclude.
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Attorneys have asked a court to compel arbitration of a class action Employee Retirement Income Security Act (ERISA) lawsuit filed against Charles Schwab Corporation and its retirement plan fiduciaries alleging fiduciary breaches and prohibited transactions.

The lawsuit, filed in the U.S. District Court for the Northern District of California, claims plan fiduciaries engaged in the imprudent and disloyal exercise of their discretionary fiduciary authority over the plan to include Schwab’s own affiliated investment products as investment options within the plan and sale of their own services to the plan. The complaint alleges that defendants “reaped significant fees and profits at the expense of the plan and its participants.”

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In their motion, the attorneys note that the arbitration provisions in Schwab’s retirement plan document and severance agreement clearly fall within the scope of the Federal Arbitration Act (FAA). The plan document’s arbitration provision broadly encompasses “[a]ny claim, dispute, or breach arising out of or in any way related to the Plan,” and extends to the ERISA claims asserted, they say. The attorneys contend the arbitration provision of the plaintiff’s severance of employment agreement likewise embraces the ERISA claims, insofar as it requires arbitration of “any dispute or breach arising out of or in any way related to [Severson’s] employment . . . .”

According to the motion, the fact that Christopher W. Severson’s claims are brought pursuant to ERISA’s civil enforcement provisions does not in any way impede or limit the application of the arbitration provisions contained in the plan document or severance agreement. “The mere fact that ERISA provides a federal court cause of action for alleged ERISA violations does not prevent parties from agreeing to adjudicate such claims in arbitration,” the attorneys argue.

In addition, the attorneys say the fact that Severson purports to bring his claims “on behalf of the Plan” under ERISA Section 502(a) does not alter the conclusion that his claims are arbitrable. Although Section 502(a)(2) of ERISA provides a cause of action for claims “on behalf of the plan,” the plaintiff bringing the claim is the plan participant—not the plan, they note.

The attorneys says the court should likewise conclude that the claims asserted by Severson must be arbitrated on an individual basis because neither the plan document nor the severance agreement evinces an intent to engage in class or representative arbitration. To the contrary, the plan document expressly waives a participant’s “right to commence, be a party to, or be an actual or putative class member of any class, collective or representative action arising out of or relating to the Plan.”

“The Supreme Court, the Ninth Circuit, and this Court have repeatedly upheld this type of class waiver,” they say.

The motion says, based on a finding that the arbitration clauses should be enforced, the court would have two alternative forms of relief at its disposal: it “may either stay the action or dismiss it outright.” “The court should compel individual arbitration of Severson’s claims and, on that basis, dismiss the lawsuit, or stay the litigation pending the outcome of individual arbitration,” the attorneys conclude.

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