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Workers Focus On Retirement Security On The Rise

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But boomers’ retirement confidence level has dropped

If there’s anything for which policy makers can take credit respecting the divisive debate over Social Security reform, then it lies in Americans’ renewed appreciation of the value of retirement planning, say the authors of a new survey.

The “Seventh Annual Transamerica Retirement Survey” was released this month by the Transamerica Center for Retirement Studies, Los Angeles, Calif. The report polled 603 employers and 1,387 workers nationwide about their attitudes regarding retirement security and benefits.

“We were taken aback by the impact of all the dialogue about Social Security and its future,” says Catherine Collinson, a senior vice president at the center. “This year, more than any other year, we’ve seen changes in savings rates, confidence levels and the value that boomers place in employer-sponsored retirement plans. The [changes] are truly pronounced.”

The changing attitudes are evident in workers’ rising interest in employer-sponsored retirement benefits. Sixty-one percent of employees consider a company-funded defined benefit plan “very important,” while 74% see an employee-funded retirement plan such as a 401(k) “very important.” These figures compare to 46% and 66%, respectively, for 2004.

The heightened importance employees attach to retirement benefits is getting through to employers. This year, 85% of employers say an employee-funded retirement plan was important to employees, up from 77% last year. Also, more companies believe a 401(k) or similar plan is key to attracting and retaining workers (79% in 2005 vs. 75% in 2004).

Similarly, 72% of employers believe that workers prefer excellent retirement benefits over a higher salary. That’s a major reversal from last year’s survey, when only 34% of employers expressed this view.

The change in sentiment, Collinson notes, likely contributed to the actual increase in the percentage of respondents who work for companies offering a 401(k). The figure in 2005 stood at 77%, vs. 73% in 2004.

“The increase in how much workers value having–and are asking for– employer-sponsored retirement plans is undeniable,” she says. “Small business employers, in particular, are tuned to the added interest and media attention on these plans.”

The renewed attention on retirement plans is reflected in workers’ more sobering assessment as to when they can retire, boomers included. Survey respondents occupying this age bracket expect on average to retire at 64, up from 63 in 2004. Among all employees, 46% say they could work to age 65 and still not have enough money saved to meet retirement needs.

Retirement confidence levels also have dropped: Twenty-three percent of those polled say they are “very confident” about achieving a comfortable lifestyle in retirement, compared with 31% last year. Among boomers, the figure dropped from 20% in 2005 from 26% in 2004.

While revealing shifting attitudes among workers generally about retirement planning, the Transamerica survey also observed differences among boomers and other age groups polled. These include “matures” (born before 1946), “GenXers” (1965-1978) and “echo boomers” (1979-1987).

For example, 79% of matures consider 401(k)s “very important,” as compared to 77% of GenXers and 74% of boomers. Just 59% of echo boomers attach the same high value to these plans. Similarly, while from 73% to 78% of all other generations opt in to their employers’ 401(k) plans, just 60% of echo boomers do the same.

A more pronounced split among the generations is seen on the question of defined benefit plans. Large majorities of boomers and matures describe these plans as “very important” (68% and 69%, respectively). These percentages drop to 61% for Xers and 32% for echo boomers.

Intriguingly, the more time that respondents spend online, the less likely they are to rate defined benefit pensions as “very important.” The opposite trend is observed with respect to 401(k) plans. Conclusion: “plugged-in” respondents are more likely to place importance on self-funded plans.

The generational patterns aren’t always linear. Boomers and echo boomers, for example, save, on average, lower percentages of their salaries (6% and 8%, respectively) than do GenXers and matures (10% each).

Boomers are more likely than other generations to have changed their retirement plan allocation in the past 12 months. Thirty-seven percent of respondents in this age bracket indicate making a change vs. rates varying between 24% and 34% for other generations. Why the higher percentage?

“The answers lies in the person’s age and projected years to retirement,” says Collinson. “Boomers are in that critical transition phase where they’re shifting from aggressive to conservative investments.”

Married boomers and those in civil unions and domestic partnerships also outpace their counterparts in other generations in their use of financial planners to help manage retirement savings or investments. Among boomers, the percentage is 46%; that contrasts with 43%, 33% and just 13% for matures, GenXers and echo boomers, respectively.

But when asked how much money they’ll have to save to retire comfortably (the median was $600,000), boomers did not rely more on an advisor-based estimate than did other generations. Indeed, boomers rated “consistently in the middle” on all methods, including the most widely cited–guesswork.

“That leads us to ask whether advisors are doing enough in helping [boomers] to connect the dots,” says Collinson. “But clearly advisors are playing an increasingly important role in helping clients take stock of where they are and need to be; how much longer they realistically need to work; and what insurance products they need.”

‘This year, more than any other year, we’ve seen changes in…the value that boomers place in employer-sponsored retirement plans.’


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