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Findings from the Retirement Confidence Survey: Implications for
Retirement Planning
How to Increase the Effectiveness of Financial Education: Lessons from Economics and Psychology
Dartmouth College
October 17, 2005
Craig Copeland, Employee Benefit Research Institute
2
73%78%
69% 72% 71% 68% 69%
57% 58% 60%66%
59%68% 74%
65% 67% 68%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Respondent Respondent and/or spouse
7 in 10 Workers Say They Have Saved for Retirement
Not including Social Security taxes or employer-provided money, have you (and/or your spouse) personally saved any money for retirement? These savings could include money you personally put into a retirement plan at work. (2005 Workers n=1,001)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 1994-2005 Retirement Confidence Surveys
3
Americans are More Likely to Save for Retirement Than for Any Other Goal
27%
16%
7%
8%
11%
8%
4%
9%
3%
11%
7%
20%
66%
69%
Workers
Retirees
Other than retirement, for what are you (and your spouse) saving? (Workers n=501; Retirees n=252) (Top mentions, multiple responses accepted)
Children's/grandchildren's education
Money for an emergency
General well being
Retirement
Home purchase or renovation
A vacation
Nothing
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
4
52%
43%
13%
20%
11%
7%
12% 11% 11%
19%
Workers Retirees
In total, about how much money would you say you currently have in savings and investments, not including the value of your primary residence? Please include savings, certificates of deposit, stocks, bonds, mutual funds, workplace retirement plans, and other investments (Workers responding n=818; Retirees responding n=190)
Most Have Little in Savings
Less than$25,000
$25,000-$49,999
$50,000-$99,999
$100,000-$249,999
$250,000or more
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
5
Retirement Needs Calculation
The first step towards planning for retirement
6
Only 2 in 5 Workers Have Attempted to do a Retirement Savings Needs Calculation
48%53%
44%
38%
43% 42% 42%
31% 32% 29% 33%42% 45%
51%
39%32%
37%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Respondent Respondent and/or spouse
Have you (and/or your spouse) tried to figure out how much money you will need to have saved by the time you retire so that you can live comfortably in retirement? (2005 Workers n=1,001)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 1994-2005 Retirement Confidence Surveys
7
3%
1%
4%
0%
7%
5%
7%
76%
2%
1%
1%
11%
10%
6%
35%
37%
10%
3%
1%
2%
5%
5%
7%
18%
21%
<.5%
46%
Total (n=929)Did calculation (n=468)Did not do calculation (n=455)
Consequently Almost Half of Workers Guess the Amount They Need to Save for Retirement
How did you (or your spouse) determine this amount? (Workers attempting calculation and/or reporting amount needed for retirement, n=929) (multiple responses accepted)
Guess
Ask a financial advisor
Cost of living/lifestyle/current spending
Other
Do your own estimate
Spouse calculated
Read or hear that is how much is needed
Fill out a worksheet or form
Use an on-line calculator
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
8
16%
7%
10% 10%12%
3%
32%
11%
$1,000,000to
$1,499,999
$250,000to
$499,999
$1,500,000or more
Under$250,000
Don’tknow/Don’t
remember
$500,000to
$999,999
RefusedCouldnot do
calculation
How much did you (and/or your spouse) calculate you would need to save in total by the time you retire? (Among workers trying to do a retirement needs calculation, n=332)
One-third who have done a calculation can’t remember the result.
Source: EBRI/ASEC/Greenwald, 2004 Retirement Confidence Survey
9
32%23%
38%
21%21% 22%
18%
21%
16%
8%
11%
6% 7%
11%
5%
<0.5%<0.5%
<0.5%
10% 8% 11%
2%4%
<0.5%
Total (n=1,001)Did calculation (n=469)Did not do calculation (n=524)
$1,000,000to
$1,499,999
$250,000to
$499,999
$1,500,000or more
Under$250,000
Don’tknow/Don’t
remember
$500,000to
$999,999
RefusedCouldnot do
calculation
How much did you (or your spouse) calculate you would need to accumulate in total by the time you retire?/How much do you think you (and your spouse) will need to accumulate by the time you retire so that you can live comfortably in retirement? (Workers n=1,001)
Workers Calculating the Amount Needed for Retirement Report Higher Accumulation Needs
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
10
28%
39%
19%
38%41%
37%
19%
12%
24%
15%
9%
20%
Total (n=871)Did calculation (n=410)Did not do calculation (n=455)
Veryconfident
Not at all confident
Somewhatconfident
Not tooconfident
Those Calculating a Specific Goal are Also More Confident They Will be Able to Save That Amount
How confident are you that you (and your spouse) will be able to accumulate this amount by the time you retire? (Workers reporting amount needed for retirement, n=871)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
11
Do calculations or educational materials matter for planning?
Does behavior change?
12
19%
5%
5%
13%
52%
10%
11%
Working Through a Savings Calculation Can Affect Savings Behavior
No55%
Don't know
1%
Yes44%
Did you (and/or your spouse) make any changes in your retirement planning as a result of trying to figure out the amount you will need to have saved by the time you retire? If yes, what changes did you (and/or your spouse) make? (Workers trying to do a retirement needs calculation, n=469)
(n=218)
(multiple responses accepted)
Started saving more
Changed allocationof money
Researched other savings
methods
Other
Reduced debt
Started saving less
Enrolled in 401(k)/opened another
account
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
13
10%
1%
4%
7%
31%
Educational Material From an Employer May Lead to a Change in Savings Behavior or Allocation Strategy
No79%
Don't know
1%
Yes20%
Did you (and your spouse) make any changes in your retirement planning as a result of the material you received from your employer? If yes, what changes did you make? (Workers receiving educational material, information, or seminars, n=446)
(n=93)
(multiple responses accepted)
Started saving more
Changed allocationof money
Researched other savings methods
Other
Enrolled in a 401(k)/ opened another
account
Started saving forthe first time
42%
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
14
When Offered, Almost Half Request Investment Advice; 3 in 4 Implement at Least Some Recommendations
Don't know
1%
Yes46%
No52%
Did you request and receive specific recommendations on how you should invest your money? If yes, did you implement all, some, or none of the recommendations you received? (Workers provided with investment advice by employer, n=248)
(n=114)
Requested and Received Implementation
Some of the
recommendations
59%
None of the recommendations
24%
Don’t know 1%
All of the recommendations
16%
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
15
What do people use to plan for retirement?
What is the most helpful?
16
87%
74%
63%
54%57%
36%
55%
41%
54%
39% 36%
10%
27%
13%19%
28%
18%
8%11%11%
Workers Retirees
Input from your spouse
Advice of family, friends, or co-
workers
Advice of a financial
professional
Written material
received at work
Newspapers, magazines,
or other written material
Online professional investment
advice services
Information available over
the Internet
Information from
television or radio
Computer software
Information from seminars
When you (or your spouse) (are/were) making your retirement savings and investment decisions, (do/did) you use…? (Workers saved for retirement, n=365; Retirees saved for retirement, n=184)
Some Often-used Sources of Financial Advice May Provide Little Real Help
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
17
Workers Say They are Most Likely to Use Investment Advice If Provided in Person
8% 20% 26% 44%
16% 29% 18% 35%
25% 39% 12% 22%
By telephone
On-line
In person
Very likely Somewhat likely Not too likely Not at all likely
If an employer offered you access to this type of professional investment advice, how likely do you think you would be to take advantage of it if the advice was available . . . ? (Workers without employer-provided investment advice, n=753)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
18
8% 20%
16% 29%
25% 39%
By telephone
On-line
In person
Very likely Somewhat likely
If an employer offered you access to this type of professional investment advice, how likely do you think you would be to take advantage of it if the advice was available . . . ? (Workers without employer-provided investment advice, n=753)
2 in 3 Workers Not Offered Advice Say They Would Be Likely to Use It If Offered in Person
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
19
Savers Most Often Find the Advice of a Financial Professional Helpful
Which (is/was) most helpful to you? (Workers saved for retirement, n=356)
17%
11%
11%
7%
2%
1%
0.5%
3%
9%
38%The advice of a financial professional
The advice of family, friends, or co-workers
Newspapers, magazines, or other written material
Input from your spouse
Written material received at work
Information available over the Internet
Information from television or radio
Information from seminars
Online professional investment advice
None/Don't know
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey.
20
8%
<.5%
1%
2%
5%
6%
6%
7%
20%
20%
23%Individual access to a financial planner
Newsletters/magazines
Online investment advice services
Brochures
Workbooks/worksheets
Retirement benefit statements
Seminars or group meetings
Software programs
Videos or CD-ROMs
None
Other online services
Which was the most helpful to you? (Among workers given educational material or seminars through employer, n=269)
In-person formats where workers can ask questions, or personalized materials are seen as most helpful.
Source: EBRI/ASEC/Greenwald, 2004 Retirement Confidence Survey
21
Do people think they are on track?
Why not?
Do they think they will make it?
22
3%2% 2%
3% 4% 3% 3% 4%
40%
34%33%
37%
25%25%26%
23%
27%
33% 34%32%
2000 2001 2002 2005
More Than Half of Workers Feel They Are Behind Schedule
When it comes to planning and saving for retirement, would you say you are on track, ahead of schedule, or behind schedule? (Workers n=1,001)
A lot aheadof schedule
On track A little behindschedule
A little aheadof schedule
A lot behindschedule
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2000-2002, 2005 Retirement Confidence Surveys
23
Many Recognize Role of Expenses, Fewer Acknowledge Other Factors Keeping Them Behind Schedule
How big a role has each of the following played in keeping you behind schedule in planning and saving for retirement? (Workers behind schedule, n=521)
17% 23% 60%
28% 44% 28%
29% 43% 27%
31% 18% 50%
33% 30% 37%
51% 31% 17%
Poor Investing
Lack of financial discipline
Wanting a comfortable lifestyle
Job loss or frequent job changes
Career choice
High expenses
Major role Minor role no role
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey.
24
20%
6%
39%
24%
40%
69%
A major problem A minor problem Not a problem
Workers Retirees
Thinking about your current financial situation, how would your describe your level of debt? (Workers n=1,001; Retirees n=252)
6 in 10 Workers Consider Their Level of Debt To Be a Problem
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
25
2/3rds of Workers Are At Least Somewhat Confident of Having Enough Money for a Comfortable Retirement
18%
55%
19%
6%
20%
45%
17%
17%
21%
51%
19%
8%
19%
41%
23%
16%
24%
41%
19%
15%
22%
45%
18%
13%
22%
47%
21%
9%
25%
47%
18%
10%
22%
41%
18%
17%
23%
47%
19%
10%
21%
45%
17%
16%
24%
44%
18%
13%
25%
40%
17%
17%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Overall, how confident are you that you (and your spouse) will have enough money to live comfortably throughout your retirement years? (2005 Workers n=1,001)
Very Not at allSomewhat Not too Don’t know/Refused
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 1993-2005 Retirement Confidence Surveys
26
20%17%
66%71%
13%10%
Workers Retirees
Thinking realistically, what kind of financial lifestyle do you think you (and your spouse) willhave in retirement? (Workers n=500) How would you describe your current financial lifestyle? (Retirees n=252)
4 in 5 Workers Think They Will Have at Least an Adequate Standard of Living in Retirement
Adequate Well offStruggling
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
27
N/A6%
18%14%
41%
17%
23%
8%3%
2%4%
38%
6%
14%
5%2%
Workers Retirees
About what percentage of your pre-retirement household income do you think you (and your spouse) will need to live comfortably in retirement? By pre-retirement income, I mean your household income right before you retire. (Workers n=500)About what percentage of your pre-retirement income is your current household income? (Retirees n=252)
3 in 5 Workers Expect to Live Comfortably on 70% or Less of Their Pre-retirement Income; Most Retirees Have More
Less than 50%
About95-105%
105%or more
Don’t know/Refused
About50-70%
About70-85%
About85-95%
Lower (Don’t
know %)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
28
Extra Slides for Discussion
Other Elements for Financial Planning
29
11%
21%20%
11% 12%
10%
3%4%
8%
How much income do you think you will be able to get from this nest egg each year in retirement without running out of money? (Workers reporting amount needed for retirement, n=871)
Some Workers May Overestimate How Much Income Their Nest Egg Will Generate
$35,000to
$49,999
$15,000to
$24,999
$50,000 to
$74,999
Less than $5,000 each
year
$100,000 or more
$25,000to
$34,999
Don’t know
$75,000 to
$99,999
$5,000to
$14,999
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
30
6% 6%
11%
5%
11%
4%
27%
15%
9%8%
17% 19%
NA
4%
19%
38%Workers Retirees
For how many years do you expect to be retired (Workers planning to retire, n=939)At the time that you retired, how many years did you expect your retirement to last? (Retirees n=252)
Half of Workers Expect to be Retired for 20 years or More
10 to 14 years
20 to 24 years
Don’t know/
Refused
15 to 19 years
25 to 29 years
30 years or more
Less than 10 years
Did not expect to
retire
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
31
19%
5%
1%
3%
3%
3%
4%
8%
22%
32%
Many Retirees Feel They Don’t Need or Can’t Afford an Annuity
Why have you not purchased or looked into purchasing a financial product that pays a guaranteed income for life? (Retirees not taking any action toward a financial product that pays a guaranteed income for life, n=127) (multiple responses accepted)
Don’t need it
Don’t believe in product/ Suspicious of product
Other
Can’t afford it/Too expensive
Don’t know/Refused
Just haven’t done it/Didn’t think of it
Already have pension/annuity
Aren’t aware of product
Don’t know where to go for information
Not interested in product/Have other products
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
32
Very Few Workers Participate in Automatic Savings Arrangements Outside of Work, but Most Know of Them
Are you currently saving for retirement outside of work using an automatic arrangement like this? (Workers n=1,001) Before today, were you aware that you could save automatically for retirement in this way? (Workers not using an automatic savings plan, n=822)
No 85%
Yes 15%
Don’t know 1%
Yes 68%
No 31%
Currently Saving Outside of WorkUsing Automatic Savings Plan
Aware Could Save AutomaticallyOutside of Work
(n=822)
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey
33
16% 4% 78%
19% 77%
19% 76%
38% 4% 56%
Offered, use Offered, don't use Not offered
An option that automatically raises your contribution by a certain
percentage or amount whenever you receive a pay raise
An option where a professional financial manager makes investment
decisions for you based on your responses to a questionnaire
A fund option that is designed for people of your age and income level
and automatically becomes more conservative as your retirement date
nears
A fund option that maintains a pre-set level of risk and generally has a mix of conservative, moderate and
aggressive investments
If this were part of your workplace savings plan, would you be very likely, somewhat, not too, or not at all likely to use it, or does your plan already have this feature? Do you participate in it? (Workers participating in a workplace savings plan, n=461)
A Large Minority of Participants Have Lifestyle Funds Available as Part of Their Plans—and Use Them
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2005 Retirement Confidence Survey