Over one-quarter of public sector employees are not confident they’ll have enough money for a comfortable retirement, according to a study by the Center for State and Local Government Excellence and TIAA-CREF.
“If we were forced to condense the results of the study to a single sentence, public-sector workers are anxious regarding retirement income security despite near universal pension” availability, Paul Yakoboski, senior economist for TIAA-CREF, said Tuesday during a webinar discussing the findings.
Defined benefit plans are vastly more common among public sector employees than all U.S. workers. Nearly three-quarters or public employees have a DB plan, compared with 28% of the general population. The gap between public sector employees and the larger workforce who have a defined contribution plan is large, but less pronounced. Over half of all U.S. workers have a DC plan, compared with 31% of public employees.
The “2012 Retirement Confidence Survey of the State and Local Government Workforce,” which was released in July, found almost 60% of public-sector workers plan to work past the age they’d like to retire, Yakoboski said. The average preferred age for retirement among public-sector workers is 59, but the average expected is nearly 64.
The good news is that public sector employees appear to be actively working toward a secure retirement. Over 90% say they have saved money outside of their employer-sponsored plan. Of those, between 92% and 96% are currently saving, the report found.
Over half of public sector employees are somewhat confident that they are saving enough for retirement, while 18% are “not too confident” and 13% are “not at all confident.” Workers are far more confident about how their assets are invested than their actual savings. Twenty-seven percent said they were very confident about their investments, while 18% said they were either not too confident or not at all confident.
Yakoboski noted that saving and planning aren’t the same thing. “Saving is not the same as planning,” he said on the call. “Ideally, saving is grounded in planning, but often that’s not the case.”
Only half of employees have tried to determine how much they’ll need in retirement, he said, but even those who have don’t have a “realistic idea” about what they’ll need. Thirty-seven percent of respondents said they needed to replace less than 60% of their income in retirement.
Although survey after survey has shown health care is one of the largest—if not the largest—expense for retirees, 22% of public sector employees are very confident they can afford medical care and 49% are somewhat confident. Public sector workers are clearly more confident than the general work force (just 13% said they were very confident about paying for health care and 44% said they were somewhat confident), but that confidence could be misplaced. Only 8% of public workers say they have planned and saved “a great deal” for expenses not covered by Medicare. Fifty-eight percent have planned hardly or not at all. Sixty-three percent of workers say they are counting on retiree health insurance to cover medical costs in retirement.
Over half of employees in the public sector have used a professional financial advisor in the last three years, the report found. The most common subject that public workers in their 50s or older sought advice on was when to actually retire. Workers under 45 were most interested in how much to save, and those over 55 wanted to know more about drawing income once the finally do retire.
However, “advice received is not necessarily advice followed,” Joshua Franzel, vice president of research for the Center for State and Local Government Excellence, said on the call. Of workers who said they were advised to increase their savings, 34% made no change whatsoever. Just 12% made the recommended change. Forty-one percent followed “most” of the advice they were given, Franzel said.