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Putnam Investments: EBRI Retirement Confidence

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Findings from the EBRI 2011 Retirement Confidence Survey

Findings from the EBRI 2011 Retirement Confidence Survey

Published in: Economy & Finance, Business

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  • We are going to look at some annual research by the Employee Benefit Retirement Institute, that tracks attitudes and behaviors of American workers and retirees towards all aspects of saving, retirement planning, and long-term financial security. This is the 20 th annual survey of retirees and workers nearing retirement. The survey contains a core set of questions that is asked annually, of a representative sample of 1,000 individuals age 25 and over. The survey was fielded in the fourth quarter of 2009.
  • Total industry flows reached $274B for the year, and continue to favor bonds . Domestic equity fund returns rebounded in July, but flows continue to be anemic Industry flows are driven by Index and ETF funds. Cash on the sidelines is at $10.7TR. EBRI is reporting low confidence levels among workers. Any Questions??????????
  • Workers who are “very confident” about having enough money for a comfortable retirement is up slightly from 13% in 2009 (an all time low) to 16% this year. Workers are still concerned about paying for basic expenses in retirement, but confidence has increased. According to another study done by Boston College Center for Retirement Research, 51% of all U.S. households that are at age 65 are at risk of not being able to continue their standard of living in retirement. Even 42% of high income ($150K+) households at age 65 are at risk.
  • In addition to supplementing retirement income, other reasons to work for pay in retirement are: Wanting to stay active Because they enjoy working This is a change from the past few years where workers were more concerned about: Keeping insurance benefits and just making ends meet These reasons have moved further down the list as confidence has increased.
  • The percentage of workers who expect to work for pay in retirement has declined slightly from last year, but the number remains high. No longer are people planning a “traditional” retirement. Many feel they will have to supplement their retirement savings and income.
  • In addition to supplementing retirement income, other reasons to work for pay in retirement are: Wanting to stay active Because they enjoy working This is a change from the past few years where workers were more concerned about: Keeping insurance benefits and just making ends meet These reasons have moved further down the list as confidence has increased.
  • Although the age when workers expect to retire is relatively unchanged at 62, the long-term view shows significant change. The percentage of workers who are delaying retirement until after age 65 has increased.
  • Workers who have lost confidence in being able to afford a comfortable retirement attribute it to the: Poor economy Change in employment status Despite the rebound from 2008, the U.S. unemployment rate remains high at 9.5%, and even those that are still working have concerns about potential job losses.
  • The positive outcome from the lack of confidence in readiness to retire has been an increase in savings for retirement. The level is down from an all time high of 75% in 2009, but is still respectable at 69% Americans are not known to have a savings culture, but what we’ve seen in the past two years is that savings rates are increasing both in retirement accounts , and personal savings accounts. Has there been a significant in savings rates in Japan?
  • Transcript

    • 1. Findings from the Employee Benefits Research Institute 2011 Retirement Confidence Survey Presented by Putnam Investments April 2011 267717 4/11
    • 2. © Copyright 2011, EBRI. Ruth Helman, Craig Copeland, and Jack VanDerhei, “The 2011 Retirement Confidence Survey: Confidence Drops to Record Lows, Reflecting ‘the New Normal’,” EBRI Issue Brief, no. 355 (Employee Benefit Research Institute, March 2011). Methodology: These findings are part of the 21st annual Retirement Confidence Survey (RCS), a survey that gauges the view sand attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The survey was conducted in January 2011 through 20-minute telephone interviews with 1,258 individuals (1,004 workers and 254 retirees) age 25 and older in the United States. Random digit dialing was used to obtain a representative cross section of the U.S. population. To further increase representation, a cell phone supplement was added to the sample. Starting with the 2001 wave of the RCS, all data are weighted by age, sex, and education to reflect the actual proportions in the adult population. Data for waves of the RCS conducted before 2001 have been weighted to allow for consistent comparisons; consequently, some data in the 2011 RCS may differ slightly with data published in previous waves of the RCS. Data presented in tables in this report may not total to 100 due to rounding and/or missing categories. In theory, the weighted sample of 1,258 yields a statistical precision of plus or minus 3 percentage points (with 95 percent certainty) of what the results would be if all Americans age 25 and older were surveyed with complete accuracy. There are other possible sources of error in all surveys, however, that may be more serious than theoretical calculations of sampling error. These include refusals to be interviewed and other forms of non response, the effects of question wording and question order, and screening. While attempts are made to minimize these factors, it is impossible to quantify the errors that may result from them. The RCS was co-sponsored by the Employee Benefit Research Institute (EBRI), a private, nonprofit, nonpartisan public policy research organization, and Mathew Greenwald & Associates, Inc., a Washington, DC based market research firm. The 2011 RCS data collection was funded by grants from more than two dozen public and private organizations, with staff time donated by EBRI and Greenwald. RCS materials and a list of underwriters may be accessed at the EBRI Web site: www.ebri.org/rcs/2011/
    • 3. Summary
      • Confidence levels among workers is back to its lowest point (13%)
        • Highest loss of confidence among those who have saved less than $100,000
      • Percentage of workers expecting income from Social Security in retirement declined to 44%
      • 75% of workers are planning to supplement their income in retirement by working for pay
      • Major reasons workers continue to work in retirement are:
        • To stay active (60%)
        • Because they enjoy working (59%)
      • Percentage of workers who expect to delay their retirement declined to 20%, from 25% in 2009
      • The poor economy is the major reason workers are postponing retirement (36%)
      • 68% of workers report that they and/or their spouse have saved for retirement;
        • A sizeable number of workers report they have virtually no savings or investments; 29% have saved less than $1,000
        • 62% of workers think they could save more for retirement
    • 4. Confidence levels among workers is back to its lowest point
      • Workers who say they are very confident about having enough money for a comfortable retirement
    • 5. Percentage of workers expecting income from Social Security in retirement is declining Workers’ expected major sources of income in retirement Employer-sponsored retirement savings plan Social Security Employment Other personal savings or investments IRA Employer-sponsored pension or cash balance plan Financial products that provide guaranteed income for life
    • 6. More workers are planning to supplement their income in retirement by working for pay
      • Workers who expect to work for pay in retirement
    • 7. Major reasons for working for pay in retirement Among workers who will work for pay in retirement Want to stay active Enjoy working Want money to buy extras Need money to Make ends meet Keep health insurance or other benefits A job opportunity Decrease in the value of savings/investments Try a different career
    • 8. Retirement expectations are delayed
      • Workers report they postponed their expected retirement age in the past 12 months
    • 9. The poor economy is the major reason workers are postponing retirement
      • Reasons given by workers for postponing retirement
      Poor economy Lack of faith in Social Security or government A change in employment status Inadequate finances or cannot afford to retire Cost of living in retirement will be higher than expected
    • 10. 68% of workers report that they and/or their spouse have saved for retirement
      • Many workers say they and/or their spouse have saved money for retirement
    • 11. … but a sizeable percentage of workers report they have no savings or investments Total savings and investments reported by workers (not including value of primary residence or defined benefit plans)
    • 12. Many workers think they could save more for retirement Workers who think it is reasonably possible to save $25 a week for retirement