retirement-security-april-2014

Insider | April 2014
towerswatson.com/research/insider 1
Retirement Security Tops List of Employee
Concerns
Results from Towers Watson’s 2013/2014 Global Benefit Attitudes Survey
By Jonathan Gardner and Steve Nyce1
Recent economic shocks have prompted
American workers to rethink their
long-term financial goals and security.
Many of them are feeling the pinch of
higher out-of-pocket health costs,
stagnant wages, restructured retirement
programs2
and lingering financial losses.
So it’s no surprise to find that workers
have become more concerned about
their retirement security. Despite their
financial worries, many are increasingly
willing to trade cash compensation for
greater certainty and more generous
health and retirement benefits.
This is the second in a series of three articles based
on Towers Watson’s 2013/2014 Global Benefit
Attitudes Survey of workers’ perceptions of
employer-sponsored benefits. The first article,
“Workers Still Uneasy About Financial Security
and Retirement,” reported on employees’ current
financial situations and their plans for retirement.3
The next article will highlight how employer-
sponsored benefits affect attraction and retention.
Retirement security becoming
increasingly important
More than half of employees reported that
retirement security had become more important to
them over the last few years (Figure 1). Seventy-eight
percent of workers aged 50 or older are concerned
about their retirement security, compared with 39%
of employees under 40.
Perhaps reflecting fears of further curtailments,
participants in defined benefit (DB) plans worry more
about retirement security than participants with only
defined contribution (DC) plans. Cutbacks to existing
plans heighten workers’ concerns about retirement
security. In fact, 75% of DB plan participants whose
plans have been frozen are concerned about
achieving a financially secure retirement.
Employer-sponsored plans are workers’
primary retirement savings vehicles
The way employees save is predominantly through
the programs offered by their employer. Seventy-four
percent of employees cite their employer plans
as their primary means of saving for retirement
(Figure 2), up from 61% in 2009. This increased
reliance on employer-sponsored plans might reflect
workers’ concerns about the future value of Social
Security — an observation highlighted in the
previous article. While the reliance rate is high for all
employees, it is particularly high for younger workers
with a DB plan (81%).
1
The authors would like to thank Charlene LeBlanc, Billie Jean Miller and Koki Mori for their support in developing this research.
2
Towers Watson, “Employer Commitment to Retirement Plans in the United States” (2009).
3
See “Workers Still Uneasy About Financial Security and Retirement,” Towers Watson Insider, March 2014.
““Seventy-five percent of
DB plan participants whose
plans have been frozen are
concerned about achieving
a financially secure
retirement.”
Figure 1. Retirement security has become a more important issue for me
over the last two or three years
Overall Age <40 Age 40 – 49 Age 50+ DB plan
DC plan
only
56%
39%
55%
78%
63%
55%
Note: Based on full-time employees enrolled in a retirement plan. Percentages indicate responses of “agree” or
“strongly agree.”
Source: Towers Watson 2013/2014 Global Benefit Attitudes Survey – U.S.
Figure 2. My company’s retirement program is the primary way I save for
retirement, 2009 – 2013
0% 10% 20% 30% 40% 50% 60% 70% 80%
2009
2010
2011
2013
7474
6565
5656
6161

2 towerswatson.com/research/insider
With the exception of older participants with only a
DC plan, all employees expect these plans to be
their primary source of retirement income (Figure 3).
Older DC plan-only participants are more likely to
expect most of their retirement income to come from
Social Security.
Satisfaction with benefits varies
Two-thirds of employees are satisfied with their
retirement plans (Figure 4). Satisfaction has climbed
13 percentage points since 2009, with much of the
increase concentrated among younger employees
and DB plan participants. DB plan participants have
higher satisfaction rates despite the frequent erosion
of these benefits over the last decade.
Yet, DB plans are still typically more generous than
the DC plans that replace them. In fact, program
satisfaction drops to 56% for DB plan participants
whose benefits were recently frozen and to 43% for
DC plan-only participants whose employers reduced
their contributions.
While satisfaction with retirement plans is rising,
satisfaction with health care plans is declining
across all demographic groups. Almost seven in
10 workers were happy with their health plans in
2007, but satisfaction rates dropped to 59% in
2013, a 10-percentage-point decline (Figure 5). This
downward trend is most pronounced among older
workers and those in poor health. Only 48% of those
enrolled in high-deductible health plans (HDHPs),
are satisfied with their health care plan.4
Given the
increasing popularity of point-of-care cost sharing
in health care program designs along with an aging
workforce, plan satisfaction may weaken further
in the future.
Figure 3. What do you think are likely to be the most important sources of income for you (or for you and your partner) during your
retirement? (Top three sources ranked in order of importance)
All respondents
DB plan DC plan only
Younger than 40 Age 40 – 49 Age 50+ Younger than 40 Age 40 – 49 Age 50+
1
Employer
retirement plan
Employer
retirement plan
Employer
retirement plan
Employer
retirement plan
Employer
retirement plan
Employer
retirement plan
Social Security
2 Social Security
Other savings &
investments
Other savings &
investments
Social Security
Other savings &
investments
Social Security
Employer
retirement plan
3
Other savings &
investments
Social Security Social Security
Other savings &
investments
Social Security
Other savings &
investments
Other savings &
investments
4
Working after
retirement
Working after
retirement
Working after
retirement
Working after
retirement
Working after
retirement
Working after
retirement
Working after
retirement
5 Property Property Property Property Property Property Property
Note: Based on full-time employees enrolled in a retirement plan. Rankings based on the percentage of employees who selected the item as one of their top three sources.
Source: Towers Watson’s 2013/2014 Global Benefit Attitudes Survey – U.S.
Figure 4. Satisfaction with retirement plan, 2009 – 2013
2009 2010 2011 2013
Percentage
point change
2009 – 2013
All 54% 63% 66% 67% +13
Age
Younger than 40 54% 69% 69% 69% +15
40 – 49 51% 63% 62% 66% +15
50+ 58% 57% 62% 65% +7
Plan type
DB plan 61% 71% 78% 78% +17
DC plan only 51% 63% 60% 64% +13
Figure 5. Satisfaction with health care plan, 2007 – 2013
2007 2010 2011 2013
Percentage
point change
2007 – 2013
All 69% 64% 64% 59% –10
Age
Younger than 40 67% 69% 65% 64% –3
40 – 49 70% 64% 63% 57% –13
50+ 71% 61% 63% 56% –15
Health status
Very good 71% 70% 72% 64% –7
Good 67% 60% 58% 57% –10
Fair or worse 67% 56% 61% 44% –23
High-deductible health plan
Not HDHP eligible 72% 65% 66% 61% –11
HDHP eligible, not enrolled 66% 65% 60% 60% –6
HDHP eligible, enrolled 55% 58% 64% 48% –7
Note: Based on full-time employees enrolled in their employer’s health care plan. Percentages indicate responses of
“agree” or “strongly agree.”
4
An HDHP is defined as a program where the deductible is at least $1,000 for
single-only coverage and typically includes an account such as a health reimbursement
arrangement or health savings account.

Rising costs are a key factor fueling the decline in
health plan satisfaction, particularly higher out-of-
pocket expenses (point-of-care costs). Employee
satisfaction with medical costs has fallen substantially,
from 53% in 2007 to only 38% in 2013 (Figure 6).
Again, satisfaction is lowest for those with an HDHP,
older workers and those in poor health.
Another important measure of value is whether a
retirement or health plan is effective in meeting
employees’ needs. This measure tends to pose a
higher threshold than satisfaction, because it reflects
whether the program does a good job of providing a
secure retirement or paying for health care. On the
other hand, satisfaction tends to reflect employees’
expectations of the program and how it compares
with those provided by other employers, which in
some cases represents a lower bar.
For retirement plans, effectiveness levels are a full
20 percentage points lower than satisfaction levels
(Figure 7). Employer plans might be employees’ first
line of retirement saving, but employees recognize
that their plans are unlikely to see them through
retirement. Perhaps employees tend to be satisfied
with what they have because there are so few
attractive alternatives.
There is not the same divergence for health care
plans: 62% of employees say their plan meets their
needs and 59% are satisfied with the plan. This
might be because most large employers provide
comprehensive health care benefits. And point-of-
care costs seem to have little impact, as 58% of
those enrolled in an HDHP say their health plan
meets their needs. However, employees managing a
health issue are less positive. Only 45% of workers in
poor health — those who need health insurance the
most — say their plan supports their medical needs.
Figure 6. I’m satisfied with the costs I have to pay including my premium and
out-of-pocket expenses, 2007 – 2013
0% 10% 20% 30% 40% 50% 60%
Fair or worse
Good
Very good
Health status
HDHP eligible, enrolled
HDHP eligible, not enrolled
Not HDHP eligible
High-deductible health plan
Age 50+
Age 40 – 49
Younger than 40
Age
2007
2008
2010
2011
2013
5353
5151
4545
4747
3838
3333
4343
3636
4343
3636
2727
4141
3737
3333
Note: Based on full-time employees enrolled in their employer’s health care plan. Percentages indicate responses of
“agree” or “strongly agree.”
Figure 7. Satisfaction with retirement/health care plans versus my retirement/
health care plans meet my needs
0% 10% 20% 30% 40% 50% 60% 70% 80%
Health care plan
Retirement plan
I Satisfaction I Meets needs
6767
4747
5959
6262
Note: Based on full-time employees enrolled in employer-sponsored retirement and health care plans. Percentages indicate
responses of “agree” or “strongly agree.”
““Only 45% of workers in poor
health say their plan supports
their medical needs.”

Employees willing to pay more for
retirement benefits than for health care
benefits
Given widespread doubts about retirement security,
it is no surprise that the demand for generous and
secure retirement benefits is rising. Overall, 62% of
employees report being willing to give up some pay
for a guaranteed retirement benefit, and more than
half would sacrifice pay for a more generous benefit
(Figures 8 and 9). This is consistent across both DB
and DC plan participants of all ages, emphasizing that
even younger employees are attuned to retirement
planning — a trend that has taken off since we first
asked these questions in 2009. Indeed, younger
employees — regardless of plan type — are typically
even more willing than older workers to trade off pay
for more generous and certain retirement benefits
(Figure 10).
Perhaps because health care is already taking a
large bite out of monthly paychecks, employees are
significantly less willing to sacrifice pay for either
more generous health benefits or more predictable
health costs. Demand for more predictable health
benefits has weakened over the past few years,
dropping from 42% in 2010 to 34% in 2013. Workers
with chronic conditions constitute an exception:
40% would give up some pay for more predictable
medical costs.
Figure 8. Willingness to pay a higher amount out of my paycheck for more
generous retirement/health benefits and retirement guarantees/predictable
health care costs
0% 20% 40% 60% 80% 100%
More generous retirement benefits
A health plan with more predictable medical costs
A program with more guaranteed retirement benefits
622711
24 42 34
13 29 58
More generous health care benefits
31 42 27
I Disagree I Neutral I Agree
Note: Based on full-time employees enrolled in employer-sponsored retirement and health care plans. Percentages indicate
responses of “agree” or “strongly agree” for agree and “disagree” or “strongly disagree” for disagree.
Figure 9. Willingness to pay a higher amount of my pay each month for
guaranteed retirement benefits or predictable health care costs, 2009 – 2013
0% 20% 40% 60% 80% 100%
2009
2011
2013
Pay for
guaranteed
retirement
benefit
622711
16 29 55
23 31 46
I Disagree I Neutral I Agree
0% 20% 40% 60% 80% 100%
2010
2011
2013
Pay for more
predictable
health care
costs
344224
21 34 45
19 38 42
Note: Based on full-time employees enrolled in a retirement plan. Percentages indicate responses of “agree” or “strongly
agree” for agree and “disagree” or “strongly disagree” for disagree.
Figure 10. Willingness to pay more for a guaranteed or more generous retirement benefit, 2009 – 2013
Age
DB plan DC plan only
Feb. 2009 June 2011 July 2013 Feb. 2009 June 2011 July 2013
Guaranteed retirement
I would be willing to pay a higher amount out of my
paycheck each month to ensure I have a guaranteed
retirement benefit (e.g., $1,000 per month for life)
<40 39% 66% 69% 44% 51% 63%
40 – 49 50% 55% 61% 57% 53% 62%
50+ 51% 57% 63% 47% 60% 62%
Generous retirement
I would be willing to pay a higher amount out of my
paycheck each month for a larger, more generous
retirement benefit
<40 – 66% 65% – 46% 58%
40 – 49 – 57% 56% – 45% 60%
50+ – 59% 62% – 58% 55%
Note: Based on full-time employees enrolled in their employer’s health care plan. Percentages indicate responses of “agree” or “strongly agree.”
Source: Towers Watson 2013/2014 Global Benefit Attitude Survey – U.S.

Fewer employees are willing to pay more for health
care benefits after they retire but before they become
eligible for Medicare (Figure 11), with younger and
lower-income employees the least willing to exchange
current pay for postretirement, pre-Medicare health
benefits. Workers might be less concerned about a
health coverage gap because of expanded coverage
options in the public exchanges; retirement saving
and current medical benefits may seem more
pressing issues.
Retirement plan generosity and certainty
continue to trump other benefits
It’s important to understand employee preferences
as they pertain to all benefits. When asked to
rank various forms of compensation, workers
overwhelmingly choose bigger paychecks (Figure 12).
Other popular choices include generous retirement
and health care benefits. Pay and more generous
retirement benefits are the top choices across all
groups, but younger workers are more likely to opt for
bigger bonuses and more paid time off than for more
generous health benefits. Retirement guarantees
rank sixth for employees 40 and older, which seems
low given their stated willingness to sacrifice some
pay for more secure retirement benefits. This
inconsistency could reflect employees’ difficulty in
assigning a value to a retirement guarantee
compared with other, more easily understood reward
components.
Figure 11. Willingness to have more withheld from pay to ensure access to
health care benefits after retirement but before Medicare, 2010 – 2013
0% 10% 20% 30% 40% 50% 60%
Fair or worse
Good
Very good
Age
$100K+
$50K – $100K
Less than $50K
Income
DC plan only
DB plan
Plan type
2010
2011
2013
5454
5050
4242
4848
4040
Age 50+
Age 40 – 49
Younger than 40
Health status
4747
4141
4343
3535
4444
4949
3636
4242
4949
Figure 12. Rank the top three areas you would choose if offered a choice by
your employer in the next year in order of importance
Younger than 40 Age 40 – 49 Age 50+
1 Pay Pay Pay
2 Generous retirement Generous retirement Generous retirement
3 Bonus Generous health care Generous health care
4 Paid time off Bonus Bonus
5 Generous health care Paid time off Paid time off
6 Career advancement Guaranteed retirement Guaranteed retirement
7 Flexible work/life Career advancement Predictable health care
““Fewer employees are willing
to pay more for health care
benefits after they retire but
before they become eligible
for Medicare.”

Another way of measuring the strength of employee
preferences is by asking workers to choose between
two reward options. Figure 13 highlights the trade-
offs employees would make between combinations
of base pay increases, more generous retirement
benefits and more certain retirement benefits.
Older employees overwhelmingly value retirement
benefits more highly than pay increases and
demonstrate a strong preference for retirement
guarantees over benefit generosity. Conversely,
younger employees rank bigger pay increases more
highly than more generous retirement benefits. But
the desire for retirement benefit certainty is stronger
than the desire for bigger paychecks among all age
groups. Likewise, retirement guarantees outweigh
greater investment freedom for workers of all ages
(Figure 14).
Fewer employees are willing to give up pay for health
care benefits. While workers would generally favor
a more generous health care plan over a larger
pay increase, they are less willing to trade a bigger
paycheck for more predictable medical costs
(Figure 15, next page). Older employees prefer both
health care plan generosity and predictable health
costs over larger pay increases, with generosity
slightly more appealing.
We see roughly equal numbers of younger employees
attracted to more generous health benefits and
wanting larger pay increases. But unlike with retirement
benefits, where guarantees are favored, younger
employees are slightly more willing to accept uncertain
health care costs in exchange for larger pay increases.
Figure 13. Degree of preference toward pay, retirement certainty and
retirement plan generosity
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Larger pay
increase today
but lower
retirement
benefit
156223
22 54 24
18 53 29
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Larger pay
increase today
but uncertain
retirement
benefit
245818
17 52 31
13 46 41
I Prefer left option I Neutral I Prefer right option
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
More generous
but less certain
retirement
benefit
Smaller pay
increase today
and more
generous
retirement
benefit
Smaller pay
increase today
and guaranteed
retirement
benefit
Less generous
but guaranteed
retirement
benefit
206713
15 61 24
12 57 31
Note: Based on full-time employees enrolled in a retirement plan.
Figure 14. Degree of preference toward retirement guarantees versus
investment freedom
A guaranteed
retirement
benefit but
retirement plan
makes the
investment
decisions
An uncertain
retirement
benefit but with
freedom to make
investment
decisions
11
I Prefer guaranteed beneﬁt I Neutral
I Prefer investment control
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
96328
28 58 14
32 57 11
““The desire for retirement
benefit certainty is stronger
than the desire for bigger
paychecks among all age
groups.”

When asked to choose between health and retirement
benefits, employees seem conflicted. Moreover, nearly
three-quarters of employees of all ages demonstrate
no preference between benefit generosity and
predictability (Figure 16). The only preference is that
of older workers for retirement guarantees rather
than more generous or more predictable health care
costs, and the partiality is relatively weak.
Taken together, these findings, based on different
survey questions, suggest employees are attracted
to “better” retirement benefits — both generosity and
certainty — but are somewhat reluctant to give up any
of their current health care benefits to obtain them.
Employers are increasingly looking to enhance the
value proposition of their benefits by offering
employees more choices. The notion of greater
choice is often viewed as instinctively appealing.
However, these survey results suggest that employee
demand for choice does not extend to a willingness
to sacrifice any of the value of their benefits. When
asked to choose between a wider array of benefit
options and enhancements to existing retirement
and health benefits, employees overwhelmingly favor
greater generosity (Figure 17, next page).
Employees are especially cost sensitive about their
health benefits, and many would prefer a lower-cost
plan to a wider variety of plan options, especially
workers in poor health and participants in HDHPs.
But in competitive market conditions, such as plans
offered through a public or private exchange,
employees might be able to access both additional
choices and lower costs.
Figure 15. Degree of preference toward pay, health plan generosity and health
cost predictability
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Larger pay
increase today
but less
generous
health care plan
186616
14 62 23
12 61 27
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Larger pay
increase today
but less
predictable
health care
costs
136621
18 65 17
13 66 21
I Prefer pay I Neutral I Prefer health care option
Smaller pay
increase today
and more
generous
health care plan
Smaller pay
increase today
and more
predictable
health care
costs
Figure 16. Degree of preference toward health versus retirement benefits and
generosity versus predictability
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
More generous
health care
plan but less
generous
retirement
benefit
137116
14 71 15
14 70 16
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Guaranteed
retirement
benefit but less
generous health
care plan
117514
14 72 14
18 72 10
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Guaranteed
retirement
benefit but less
predictable
health care costs
Less generous
health care
plan but more
generous
retirement
benefit
Uncertain
retirement
benefit but more
generous
health care plan
Uncertain
retirement
benefit but more
predictable
health care
costs
117316
16 70 15
21 69 10
““These results suggest that
employee demand for
choice does not extend to a
willingness to sacrifice any of
the value of their benefits.”

Insider | April 2014Insider | April 2014
Copyright © 2014 Towers Watson. All rights reserved.
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Towers Watson is a leading global professional services company that helps organizations improve performance through effective
people, risk and financial management. With more than 14,000 associates around the world, we offer consulting, technology and
solutions in the areas of benefits, talent management, rewards, and risk and capital management.
““The widespread yearning for a more secure
employment deal — especially the
retirement package — is undeniable.”
Conclusion
These results suggest that employees have been
thinking harder about their finances and retirement
plans over the last few years. Employer-sponsored
benefits continue to play a large role in employees’
plans for the future, but many of these benefits
have been curtailed or seem at risk of cutbacks.
The corporate shift from DB plans to DC and other
account-based plans has unsettled workers. Many
grew up expecting the generosity and security of their
parents’ DB plans and Social Security benefits, and
view their own retirement futures as up in the air.
Moreover, rising medical costs have prompted
employers to shift a larger share of the premium and
point-of-care cost burden to workers, many of whom
were already feeling financially stressed.
While retirement and health plans continue to evolve,
certain trends and attitudes have become evident
over time. Workers express increasing satisfaction
with their retirement plans but still worry that their
retirement income will come up short. While
employees rely on and value their health care plans,
they are not happy about their higher health care
costs, especially when the costs are consuming a
significant share of their household budget.
Employees are not only willing to pay more now for
a guaranteed retirement later, but they would trade
pay for many other benefits — at least on paper —
including retirement generosity and health care plan
generosity and certainty. How much employees would
actually give up for a guaranteed retirement income
is uncertain, but the widespread yearning for a more
secure employment deal — especially the retirement
package — is undeniable.
For comments or questions, contact
Jonathan Gardner at + 44 1737 274097,
jonathan.gardner@towerswatson.com; or
Steve Nyce at + 1 703 258 7573,
steven.nyce@towerswatson.com.
Figure 17. Degree of preference toward retirement and health plan generosity
versus a wider choice of options
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
More generous
retirement
benefit but
limited choice of
benefits
76033
35 58 7
39 55 6
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
More generous
health care
plan but limited
choice of
benefits
76628
33 61 5
33 59 7
0% 20% 40% 60% 80% 100%
Age 50+
Age 40 – 49
Younger than 40
Fewer health
plan options but
at lower cost
to you
Less generous
retirement
benefit but more
benefit options
Less generous
health care plan
but wider variety
of benefits
Wider variety
of health plan
options but at
higher cost
75934
35 57 8
33 58 10

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