2007 Retirement Confidence Survey: Many American Workers See—But Ignore— Retirement System Changes

State Farm® calls for retirement planning action now

Washington, April 11, 2007 -- A large percentage of American workers see that the U.S. retirement system is going through major changes, but many are not taking steps that are likely to leave them well-positioned for a comfortable retirement, according to the 17th annual Retirement Confidence Survey (RCS).

The survey, released today, is sponsored by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, with underwriting support from State Farm Insurance.

The RCS, begun in 1991, is the country’s most established and comprehensive study of the attitudes and behavior of American workers and retirees toward all aspects of saving, retirement planning, and long-term financial security. The full report is available online at www.ebri.org.

Highlights include:

• The 2007 RCS finds pension-plan changes by employers have left nearly half of workers less confident about the benefits they will receive from a traditional pension plan, but that those experiencing a decline in retirement benefits often fail to react constructively. Among workers who have personally experienced reductions in the retirement benefits offered by their employer, nearly 2 in 5 indicate that they have done nothing in response to these reductions.
  
  
• Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable.  Forty-one percent of workers indicate they or their spouse currently have a defined benefit pension plan, while 62 percent say they are expecting to receive income from such a plan in retirement.  Both numbers suggest unrealistic beliefs.
  
  
• Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000.  The majority of workers who have not put money aside for retirement have little in savings at all: 7 in 10 of these workers say their assets total less than $10,000. 
  
  

“Most people dream of a long, healthy and comfortable retirement,” said Jack North, Senior Executive Vice President of State Farm Insurance.  “But the research clearly shows people are not taking the necessary steps to plan for a secure financial future.  Fortunately, State Farm agents have the experience, the products, and the personalized, Good Neighbor know-how to help people realize their dreams.  It’s never too soon to start planning for a comfortable retirement.”

Here are details of some of the key survey findings:

Confidence—Americans generally are quite confident they will have enough money to live comfortably throughout their retirement years. This year, 72 percent were either very confident (30 percent) or somewhat confident (42 percent) of having enough money for a comfortable retirement. That is statistically the same as the    70 percent who were either very confident or somewhat confident in 2006.

However, changes in the employer pension system that have taken place in the last five years have left a total of 45 percent of workers either a little less confident (27 percent) or much less confident (18 percent) about the amount of money they will receive from a traditional pension from an employer. Sixteen percent said they were much more confident (5 percent) or a little more confident (10 percent) about receiving money from an employer-provided traditional pension. The rest were just as confident as workers were five years ago.

The survey showed that nearly 1 in 5 workers or their spouses (17 percent) experienced a cut in the level of retirement benefits from an employer plan in the last two years. Seventy-one percent of workers and their spouses experienced no decrease in the last two years.  The finding comes against a background of many employers switching from traditional defined benefit pensions to defined contribution plans (typically 401(k) plans) in recent years.

Investment Advice, Internet Use—Congress last year allowed companies that manage employer-sponsored retirement plans to offer investment advice to workers – a recognition that 401(k) plan participants have to make a number of decisions, such as whether to participate in the plan, how much to contribute, how to invest the contributions, and what to do with the money if they change jobs or retire.

If this service were available at a modest cost, just over half  of workers (54 percent) said they would be very likely or somewhat likely to take advantage of it, while 43 percent said they would not be too likely or not likely at all to take it. However, of those workers who said they would be likely to ask for personalized investment advice, two-thirds (66 percent) said they would implement only the recommendations that were in line with their own ideas. Only 21 percent said they would implement all of the recommendations, as long as they came from a trusted source.

The survey also found that many workers have reservations about using the Internet for financial activities.  More than half said they are very or somewhat comfortable with the comparatively anonymous activities of obtaining information about financial products (54 percent) or using calculators (54 percent) online.  But fewer said they are comfortable shifting money from one account or investment to another online (43 percent), obtaining advice from financial professionals online (34 percent), or purchasing financial products online (29 percent).