Retirement Planning Still an Issue for Many Employees

The slumping economy may have bruised some future plans of employees and employers, but the need to prepare carefully and realistically for retirement endures.

This is one of the key findings from a survey conducted by the Employee Benefit Research Institute (EBRI) on the attitudes and behavior of American workers and retirees toward all aspects of saving, retirement planning and long-term financial security. Towers Perrin was a sponsor.

Workforce expectations still running high

The 2009 Retirement Confidence Survey confirms the fears of many employers — and their employees — who are wrestling with the impact of the recession on retirement planning.

Only 28% of employees report that they expect to retire later than previously planned, which means that the remaining 72% still expect to retire at the same age or, for some, even earlier.

This surprising result may be partially explained by unrealistic expectations versus the reality that is also revealed in the survey. Of those already retired, 50% reported that their actual retirement age was lower than their expected age of retirement. They also reported that, most of the time, their retirement was not voluntary but rather was the result of changes in their health, their spouse's health or the condition of their company.

It's also interesting to look at two points of the retirement age spectrum. About 35% of retirees reported that they retired before age 60, whereas only 10% of the workers surveyed had expectations to retire then. Only 6% continued to work beyond age 70, whereas more than 30% of workers say they expect to continue to work that long.

Messages for employees and employers on retirement planning

For employees, the message is: When it comes to retirement planning, be prepared for the unexpected. Save as though you will have to retire early because life's uncertainties may leave you with no option.

For employers, the study underscores ongoing workforce planning challenges. Companies struggling in the current economy may look for staff reductions but find that many employees want or need to continue to work. U.S. employers that participated in a separate Towers Perrin survey reported that 59% of employees were postponing retirement in response to the recession (see our report, Benefits in Crisis — Weathering Economic Climate Change). 

Of course, companies may also find that valued employees are leaving prematurely. More creative programs, such as phased retirement, may be needed to balance employee retention needs with downsizing imperatives.

Other key findings on retirement planning

Other findings of the EBRI survey can be summed up this way: "When it comes to retirement planning, many people are not very good at it, but they think they are."

Here are the facts:

• About 80% of those surveyed reported that retirement planning is not a burden.
• Only about 65% are actually saving for retirement.
• Of those that save, 65% have saved less than $50,000.
• Almost 50% just guess at the amount of their retirement needs.
• Almost 50% think they will need less than $500,000 to retire.

For employers, these findings point to an opportunity to improve employees' retirement planning capabilities. These efforts could lead to the direct benefits of improved workforce management as well as a clear demonstration of employer commitment to employee well-being. Towers Perrin research has found that when company leaders demonstrate concern for employee well-being, they help drive engagement.

For employees, the message is: Genuine retirement planning is harder than you think. Be careful, and prepare with sound retirement planning or you run the risk of reducing your standard of living when life's surprises occur and you have to retire.

A copy of the full survey report can be found on the EBRI Web site. To learn more about this survey's results and what they could mean for your organization, contact us via e-mail or contact your local Towers Perrin office.