More than half of workers (54%) surveyed as part of the Retirement Confidence Survey (RCS) indicate they would be likely to take advantage of professional investment advice offered by companies that manage employer-sponsored retirement plans; however, two-thirds (66%) of these workers say they would probably implement only some of the recommendations they receive and 11% think they would implement none of them.
Nineteen percent of workers state they would be very likely to take advantage of investment advice if it were available at a modest cost; 35% said they would be somewhat likely to take advantage of the service; and approximately two in 10 each would be not too likely (21%) or not likely at all (22%) to use such services.
However, when they do use educational materials, 40% of people found the advice of a financial professional most helpful when compared with all other sources of education materials about retirement, followed by the advice of family, friends or coworkers (18%) and written materials from an employer (15%).
Defined Benefit Plan Access
Although Americans may be aware of the dwindling pension system, the majority has not correlated the news with a need for increased personal savings. Nearly half (45%) of U.S. workers are less confident that they can count on traditional pensions when they retire as a result of recent changes to the employer pension system, but only about one-third say they are saving more money on their own as a result, RCS says.
The survey showed that some workers are putting their confidence in employer benefits that are increasingly becoming unavailable, with 41% of workers saying they or their spouse now have a DB plan, but 62% of those respondents saying they expect to get income from that plan in the future.
Only 20% of workers are counting on getting DB pensions from a future employer, EBRI says, a reality that is becoming dimmer as employers continue to shift in droves to DC plans. In fact, the report shows that this has already begun to happen as some workers (17%) admit to already seeing a reduction in their benefits.
The unrealistic expectations are leading to small account balances; nearly half of all workers saving for retirement have savings that fall short of the $25,000 mark and 34% don’t have any money saved for retirement and 25% have no savings at all. It is not just young workers either, half of workers age 35 to 44 and a third of workers age 45 to 55 and older have balances under $25,000.
Retirement Savings Needs
The survey showed a lack of understanding in how much money will need to be saved for retirement: 30% of workers believed their retirement nest egg would need to be worth less than five times their current income, while 27% thought they needed to save between five and 10 times their income. However, according to EBRI estimates, this means the majority of people are grossly underestimating their savings. Men should have a savings equal to about 12 times their income just before retirement, EBRI estimates, and that number is 14 times for women, to accommodate their longer life expectancies.
Workers are taking the following measures to make sure they have enough for retirement, according to the survey says:
32% say they are saving more, either on their own (24%) or in an employer’s plan (8%).
12% say they are trying to stay healthy;
5% plan to work during retirement;
5% are making greater use of financial planning or investment information;
4% plan to postpone retirement;
4% plan on seeking advice from a financial professional; and
Almost four in 10 indicate they have done nothing in response to the reduction in benefits.
Overconfidence in Health Care Coverage
Even though many employers are eliminating health care coverage for future retirees, 41% of workers expect to have access to employer-provided health insurance when they retire.
The report found that 24% of workers and 35% of retirees report they have long-term care insurance (separate from health insurance, Medicare, and Medicaid) to help pay for care they might need in a nursing home, assisted living facility, or at home. Estimates of private long-term care insurance policy use show that 10% of Americans age 65 and older had private long-term care insurance in 2002, suggesting that many are counting on coverage they do not actually have, the report said.