In the Media

 

 

 

U.S. Workers’ Confidence in Retirement Grows



January 2012




(PLANSPONSOR.com) – U.S. employees’ confidence in their ability to retire comfortably rebounded last year from post-recessions lows. 




According to the Towers Watson Retirement Attitudes Survey, despite growing satisfaction with their financial situation and fewer employees reporting significant declines in retirement savings, many employees remain concerned and are taking steps to get their financial houses in order.




The Towers Watson survey found that the percentage of workers who said they were very or somewhat confident about having enough resources to live comfortably 15 years into retirement increased from 62% in 2010 to 68% last year. Workers, however, are less confident about living comfortably throughout retirement. Less than half (47%) of respondents said they were very or somewhat confident they will have enough resources to last 25 years into retirement. This compares with 40% who said they were very or somewhat confident in 2010.



The survey also found that fewer employees are experiencing significant declines in their pension and retirement savings – 47% in 2011 versus 55% in 2010 and 60% in 2009. Additionally, employee satisfaction with their household finances continued to improve, jumping from 33% in 2010 to 41% in 2011. Despite this upturn, three in five workers (59%) remain generally unsatisfied with their financial situation.


“As the economy shows periods of stable ground, employees are slowly beginning to be more optimistic about retirement,” said Kevin Wagner, a senior retirement consultant at Towers Watson. “However, the financial crisis was jolting to American workers. As a result, many employees are more financially conservative today and have a renewed interest in improving their financial decisions and planning and saving for retirement.” 




The survey also noted after two years of cutting back on daily spending, paying off debt and saving more for retirement, some respondents plan to take additional measures this year to get their financial houses in order. These steps include further cost cutting and a sharpened focus on retirement security.
 

According to the survey, the percentage of workers with defined benefit (DB) pension plans who are satisfied with their household finances jumped sharply in the past two years, from 29% to 49%. DB participants are more than twice as likely to feel “very confident” about the first 15 years of retirement and 2.5 times as likely to contemplate a 25-year retirement with confidence compared with workers with only a 401(k) plan. 



A larger percentage of younger workers (under age 40) were also satisfied with their household finances last year (47%) compared with 2009 (28%). However, nearly two in three (66%) of young workers said they will need to save much more in the future to achieve a comfortable level of retirement income. Moreover, the percentage of young workers who carefully reviewed their retirement plans increased by more than 40% between 2010 and 2011.

“While the depressed economy may have triggered some of these prudent behaviors, increased attention to retirement planning, especially for younger workers, can be a helpful step for employees to save for a secure retirement,” said Bill Daniels, a senior retirement consultant at Towers Watson. “This is an opportunity for employees to make positive strides for their future. It can also be an opportunity for employers to take advantage of emerging education and planning technologies to drive up appreciation of benefits programs.”





Other survey findings include:

  •   Nearly four in 10 respondents (39%) plan to delay retirement, with older employees (46%) and those in poor health (42%) most likely to retire later. The majority of workers delaying retirement (60%) expect to work at least an additional three years.


  • Nearly three-fourths of respondents (74%) use their employer or plan administrator’s website for educational material to help prepare for retirement. Almost two in three (65%) use online retirement tools and educational material mailed to their home.

    The Towers Watson Retirement Attitudes Survey was conducted in June/July 2011 and includes responses from 9,218 full-time U.S. employees at non-government organizations with 1,000 or more employees. For more information, visit  http://www.towerswatson.com/united-states/newsletters/insider/6214.



    Pensions Preferred Retirement Plan

    October 2011


    (NIRS) Washington, D.C.— A new study of the retirement plan choice in the public sector finds that defined benefit (DB) pensions are strongly preferred over 401(k)-type defined contribution (DC) individual accounts. The study analyzes seven state retirement systems that offer a choice between DB and DC plans to find that the DB uptake rate ranges from 98 to 75 percent. The percentage of new employees choosing DC plans ranges from 2 to 25 percent for the plans studied.

     

    In recent years, a few states have offered public employees a choice between primary DB and DC plans. The new study, Decisions, Decisions: Retirement Plan Choices for Public Employees and Employers, analyzes the choices made by employees and finds that:

    • When given the choice between a primary DB or DC plan, public employees overwhelmingly choose the DB pension plan.
    • DB pensions are more cost efficient than DC accounts due to higher investment returns and longevity risk pooling.
    • DC accounts lack supplemental benefits such as death and disability protection. These can still be provided, but require extra contributions outside the DC plan which are therefore not deposited into the members’ accounts.
    • When states look at shifting from a DB pension to DC accounts, such a shift does not close funding shortfalls and can increase retirement costs.  
    Click here to read the full study.







    Pensioners Provide Income to Small Towns: NIRS








    July 2011 (Reuters) - Struggling towns and small communities in the United States are finding economic security in their ranks of pensioners, a retirement expert told a Senate committee.





    "Pension payments are particularly vital to small communities and economies across the country where there is a lack of diverse local industries or where other steady sources of income may not be readily found," said Diane Oakley, executive director of the National Institute of Retirement Security, at a hearing about the state of pensions.





    In recent years the private sector has moved toward retirement plans that combine employer and employee investments in individual accounts.




    The public sector has stuck to pension plans that send retirees a defined amount each month generated by employee and taxpayer contributions as well as investment
    earnings.




    Preliminary data collected by Oakley's group suggest that in 2009 public pensions and the remaining private sector plans supported more than $121.5 billion in annual federal, state and local tax revenue. In 2006, state and local pension benefits alone brought in more than $57 billion, she said.




    Because pension payments are fixed, retirees who receive them do not tend to change their spending habits in the face of financial crises or
    stock market instability, Oakley said.



    She pointed to rural Costilla County in Colorado. In 2009, $2.1 million in pension benefit payments made up 35 percent of the earned income of the county, she said.




    Her group estimates that each dollar of the $151.6 billion sent to public pensioners in 2006 supported $2.36 in economic activity.






















    Survey Suggests Improving Public Pension Picture

     

    June 2011

     

    (Reuters) - As the issue of underfunded public pensions in the United States takes center stage at city council meetings, state budget drafting sessions, congressional hearings and public protests, a report released on Wednesday says the problem may be getting better.

     

    "Public pension funds are experiencing a robust recovery from the historic market downturn of 2008-2009 -- reporting strong investment returns, growing assets and funding levels on track to meet obligations," said the National Conference of Public Employee Retirement Systems.

     

    The group, the largest trade association for public sector pensions, surveyed state and local systems representing 7.6 million people and assets exceeding $900 billion.

     

    It found that over the last year, funds have achieved an annual investment return of 13.5 percent, nearly double the 7.7 percent rate most assume.

     

    On average, said NCPERS, pension systems are 76.1 percent funded, meaning they can cover more than three-quarters of liabilities. Typically, pensions are considered fully funded when they surpass 80 percent.

     

    "In addition, funds have responded to changes in the economic, political and social landscape by adopting substantial organizational and operational changes to ensure their long-term sustainability," NCPERS said.

     

    Pensions are backed by contributions from employees and employers and by earnings from investments, which NCPERS found make up 66 percent of fund revenue. Employer contributions, essentially the taxpayer bill, comprise about 24 percent of revenues, it said.

     

    Typically, when investment returns are low, governments increase contributions. But amid some of the worst budget crises in recent memory, state and local governments cut deposits just as the stock market plunged.

     

    With most states beginning a new fiscal year in less than a month, investors in the $2.9 trillion municipal bond market are worried that they cannot fund pension promises.

     

    The study found the annual investment return for pension funds when averaged over three years, which would include the time of the financial crisis, was 1 percent.

     

    NCPERS found that over the last two years most public pensions have lowered their assumed rates of return, lengthened the period of time to amortize their liabilities, increased employee contributions and raised the retirement age.

     

    The findings are in sync with a recent National Conference of State Legislatures report that 33 states changed their public pension plans from January 2010 through May 2011, with 23 requiring future employees to make higher contributions.

     

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    DB Plans help Employers Attract and Retain Employees

     

    January 2011 

     

    A recent Towers Watson survey found that employers that provide defined benefit pensions have an advantage in attracting and retaining employees.  The survey concluded that 60% of new employees identified DB plans as a key reason they decided to work there.  This is up 27% from 2009.  The study also found that 72% of new employees said the retirement plan is an important reason they plan to stay with their employer, up from 51% in 2009.

     

     

     


     

     

     

     

    Workers willing to Pay more for Guaranteed Retirement Benefits

     

    October 2010

     

    A Towers Watson survey found that a majority of workers (56%) would be willing to pay a higher amount from their paycheck to ensure a guaranteed retirement benefit, like LAGERS.

     

    Four in 10 of the nearly 9,100 U.S. workers surveyed are planning to delay their retirement, according to a press release. Older workers and those in poor health comprise the largest percentage of employees planning to delay retirement. In particular, 45% of employees in poor health plan to postpone their retirement.   

     

    When asked why they are choosing to retire later, more than two-thirds (68%) of older workers said to keep their health care coverage, while 62% cited the higher cost of health care. Six in 10 older workers (61%) blamed the decline in the value of their 401(k) plan.  

     

    The survey also found more than one-third (37%) of employees with a 401(k) plan intend to increase contributions over the next 12 months, while one-half (51%) plan to keep contributions at the same level. Nearly half (47%) of respondents say they are comfortable making their own retirement investment decisions.   

     

    More than six in ten respondents (63%) are actively paying off their debts to improve their financial situation, nearly double the number (33%) in early 2009, the press release said. More than half (54%) are cutting back on their daily spending, while roughly one-third (34%) are increasing their monthly savings, compared to only 19% in early 2009.   

     

    Older workers (age 50 and above) have reduced their savings needs the most over the past 15 months, while adopting more conservative saving and investment strategies.

     

     

     


     

     

     

     

    Pensions are the Real Deal

     

    July 2010

     

    The Journal of Pensions Benefit has published a NIRS analysis of why defined benefit pensions have proven to be a durable feature of compensation for state and local governments.

     

    As we look across the nation, we see governments making a number of changes to their retirement plans—increasing contributions, adjusting retirement ages, and modifying benefit design. However, governments’ commitment to defined benefit pensions has generally not wavered. That has been a surprise to some who have called for the public sector to follow the path of the private sector, away from DB pensions and toward greater reliance on defined contribution plans.

     

    But the resilience of DB pensions in the public sector is less surprising to those who understand that these plans are ideally suited to serve the interests of all of the key stakeholders involved—taxpayers, employees, and public employers. Here are three reasons why DBs have proven to be such a durable feature of the compensation landscape in state and local government.

     

    Read the entire article here

     

     

     


     

     

     

    43% of Americans Have less than $10,000 Saved for Retirement

     

    March 2010

     

    A recent study from the Employee Benefit Research Institute found that  the percentage of Americans with virtually no retirement savings grew for the third straight year.

     

    According to the study, 43% of American workers have less than $10,000 saved for retirement, up from 39% in 2009.  An even more sobering figure from the report is that 27% of workers have set aside less than $1,000 for life after work.

     

    Most financial planners agree that people should generally strive to replace around 80% of their pre-retirement income with their pension, Social Security, and personal savings. 

     

     

    Read the entire CNNMoney article here . . .