s Retirement Security In Jeopardy Eighth Annual Transamerica Retirement Survey Transamerica Center for Retirement Studies September 2007 TCRS 2007-003
Eighth Annual Transamerica Retirement Survey Table of Contents Transamerica Center for Retirement Studies 3 Survey Objectives 4 Survey Methodology 5 s Retirement Security in Jeopardy 6 About Harris Interactive 22 2
Transamerica Center for Retirement Studies The Transamerica Center for Retirement Studies ( The Transamerica Center ) is a non-profit corporation dedicated to educating the American public on trends, issues, and opportunities related to saving and planning for retirement and achieving financial security in retirement. The Transamerica Center s research focuses on how to educate and effect positive changes among the American public in achieving greater levels of financial security in retirement. Its research emphasizes savings trends among all Americans and segments within the population, trends of employersponsored retirement plans and their participating employees, and the implications of legislative and regulatory changes. The Transamerica Center s outreach efforts include a comprehensive website, publishing of research findings through media articles and interviews, collaboration with industry groups and other organizations sharing an interest in this cause. For more information about The Transamerica Center, please see www.transamericacenter.org 3
Survey Objectives For the past seven years, the Transamerica Center for Retirement Studies has conducted a national survey of U.S. business employers and workers regarding their attitudes toward retirement. The research emphasizes employer-sponsored retirement plans, issues faced by small- to midsized companies and their employees, and the implications of legislative and regulatory changes. To this end, Harris Interactive was commissioned to conduct the Eighth Annual Transamerica Retirement Survey. Where appropriate, questions were tracked and some new questions were added to investigate new topics of interest. 4
Survey Methodology A telephone study was conducted among 1,402 American workers, using a nationally representative random sample meeting the following criteria: Work full-time for pay at a company with at least 10 employees 18 or older Excluding government workers and not-for-profit organizations A total of 715 men and 687 women 20 minute telephone interview. Interviews were conducted between July 27 and Oct. 7, 2006. Data were weighted to ensure that each quota group had a representative sample based on the number of employees at companies in each employee size range. Margin of error at the 95% confidence level is +/- 2.6%. A in the report indicates a number is significantly higher. The base size is 671 for large companies (500+ workers) and 731 for small companies (10-499 workers). Other reduced bases are noted throughout the report. 5
s Retirement Security in Jeopardy 6
s Retirement Security in Jeopardy are at greater risk (than men) as it relates to retirement savings and the ability to retire comfortably for these reasons: Increased savings needs due to longer life expectancy than men 1 Greater likelihood of needing long-term care 2 Diminished ability to save due to potential gaps in employment and parttime work to attend to families (i.e., caring for children or parent) and lower pay than men 3 The Eighth Annual Transamerica Retirement Survey explores differences between women and men as it relates to attitudes and behaviors towards retirement savings... and it offers insights on how to help women better prepare for retirement. 1Social Security Administration, Social Security Online Actuarial Publications, Period Life Table 2002, Updated June 27, 2006. 2Center for Disease Control/National Center for Health Statistics. 1999 National Nursing Home Survey. 3 United States Census Bureau, Evidence From Census 2000 About Earnings by Detailed Occupation for and, Census 2000 Special Reports, May 2004. 7
s Retirement Confidence 3 25% 15% 1 5% Confidence in Ability to Retire With a Comfortable Lifestyle % Very Confident 23% 27% The Eighth Annual Transamerica Retirement Survey found that women s retirement confidence is lagging compared to that of men. I am building a large enough retirement nest egg % Strongly Agree I could work until age 65 and still not have enough money saved to meet my retirement needs - % Strongly Agree 25% 15% 1 18% 21% 3 25% 15% 1 28% 5% 5% 8
Greatest Financial Priority Which of the following is your greatest financial priority right now? 25% 15% 23% 21% 19% 13% 18% 18% 18% 18% 17% 1 5% 3% 4% 3% 3% Saving for retirement Just getting by - covering basic living expenses Paying off debt Supporting children and/or parents Paying off mortgage Paying healthcare expenses Other (v) While the most commonly cited financial priority among women is saving for retirement, women are significantly more likely than men to indicate that they are just getting by to cover basic living expenses. 9
Competing Priorities What one factor or financial priority is most preventing you from saving more for your retirement? 45% 4 35% 3 25% 15% 1 5% 4 32% Already stretched - need to cover basic living expenses 29% 28% Other savings priorities such as tuition, house, or car 14% 18% Too much debt - need to pay it off 7% Don't know enough about investing 5% 5% 2% Unplanned major or catastrophic expenses... And women are significantly more likely than men to cite that they are already stretched with current living expenses as their main reason for not saving more for retirement. 10
Primary Source of Income at Retirement Which one of the follow ing do you expect to be your primary source of income to cover your living expenses after you retire? 5 4 46% 42% 3 11% 14 % 15% 11% 22% 1 3% 2% 1% 3% 1% 2% 401(k) account / IRAs Social Security Companyfunded pension plan Other savings and investments Inheritance Other (v) Home equity are more likely than men to cite their 401(k)/ IRA accounts and Social Security as their expected primary source of income at retirement. 11
Retirement Plans are Important to 8 7 6 5 4 3 1 401(k) or Similar Plan % Very Important 73% 7 place a high value of importance on a companysponsored retirement plan and are more likely than men to change employers to one that offers a retirement plan if their current employer doesn t offer one. Percentage Likely to Choose Excellent Retirement Benefits Over a Higher Salary How likely would you be t o leave your current employer t o t ake a nearly ident ical job, with a similar employer, if that employer offered a retirement plan? %Likely 8 7 6 5 4 3 1 58% 59% 7 6 5 4 3 10 % 66% 59% 12
A Slow Start and Lagging Participation Rates have started saving for retirement at an older age than men. Mean Age 29 27 Median Age 26 25 Plan Participation Rate 8 7 6 5 4 3 7 76% s 401(k) or similar plan participation rates lag behind men. 1 13
Paradoxical Contribution Rates 4 35% 3 25% 15% 1 5% Contribution Rate 37% 29% 23% 25% 13% 13% 16% 8% 6% 1 to 4% 5 to 9% 10 to 14% 15 to 19% + Mean 9.7% 8.9% Median 6% 8% Looking at the mean, women s contribution rates are slightly higher than men s. However, the median reveals a much lower contribution rate for women at 6%. An encouraging point of interest is that women are more likely to save more than of their salary than men. 14
Saving for Retirement Outside of Work 7 6 5 4 3 1 Are you currently saving for retirement outside work, such as in an IRA, mutual funds, bank account, etc.? (% Answering Yes) 54% 59% are less likely than men to be saving for retirement outside of work and those who do are more inclined to save in savings accounts rather than more appropriate retirement savings vehicles. What types of retirement investments are you currently saving in outside of w ork? 7 6 5 4 3 65% 55% 58% 49% 45% 38% 45% 35% 4 34% 29% 27% 21% 17% 21% 14 % 12 % 14 % 1 Savings IRA Mut ual Funds St ocks Primary CDs Bonds Real Est at e Annuity Account Residence investments other than primary residence 15
Amount Needed to Save to Feel Secure 5 45% 4 35% 3 25% 15% 1 5% Amount Needed to Feel Secure in Retirement 44% 27% 25% 12% 13% 17% 12% 7% 8% 7% 11% 11% 3% 4% < 100k $100k - $250k $250k - $499k $500k - $1M $1M - $2M $2M+ Not Sure/Decline Mean $1.96M $2.14M Median $500k $1M Despite the fact that women are statistically likely to live longer than men, women indicated significantly lower estimates than men when asked how much they need to save to feel secure in retirement. 16
Amount Needed to Save to Feel Secure - Basis 5 4 3 1 45% 3 Method of Estimating Retirement Savings Needs 16% 11% Guessed Worksheet / calculation 31% 26% 4% 6% 7% 3% 4% 6% 3% 2% Read / heard Financial adviser Based on current expenses Expected investment earings Other Guessed 45% 3 Worksheet / Calc 11% 16% are more likely to have guessed at how much they will need to save though the men s guess rate is also alarming. are also less likely to have completed a worksheet or calculation to estimate their needs. 17
Total Household Retirement Savings Amount Saved - All Household Retirement Accounts 18% 16% 14% 12% 1 8% 6% 4% 17% 15% 9% 7% 13% 7% 11% 12% 11% 9% 7% 14% 15% 8% 14% 6% 12% 9% 2% < $5k $5k to $10k $10k to $25k $25k to $50k $50k - $100k $100k - $250k $250k+ Not Sure Declined Only 15% of women surveyed reported over $100k in total household retirement savings compared to 29% of men. 18
Education & Advice is Welcome and Vital 8 7 6 5 4 3 1 Do Not Know as Much as I Should About Retirement Investing % Agree 75% 64% While the majority of women surveyed agree that they do not know as much about retirement investing as they should, over half indicated that they would prefer to rely on outside experts and over half would like more information and advice from their employers on how to achieve their retirement goals. Therein lies the beginnings of a solution... education and advice. Prefer to Rely on Outside Experts to Manage Retirement Savings % Agree I Would Like More Information & Advice from My Employer % Agree 6 5 59% 51% 6 5 58% 56% 4 4 3 3 1 1 19
Hey, What About the Marriage Factor? Does marriage factor into the ability for women to achieve a comfortable retirement? The answer is yes. In fact, the survey data revealed that marriage positively influences both women and men as it relates to saving for retirement. 10 5 Confidence in Ability to Retire w ith a Comfortable Lifestyle % Confident 76% 8 72% 76% Married Single Plan Participation Rate Saving For Retirement Outside of Work 10 8 6 4 72% Married 81% 64% 63% Single 7 6 5 4 3 1 55% 61% 52% Married Single 47% 20
Final Conclusions at Risk The Eighth Annual Transamerica Retirement Survey reveals that women s retirement security is indeed at risk The Transamerica Center believes education is critical to effecting change and recommends educational efforts be undertaken to: Further impart to women the need to save more due to longer life expectancy Increase retirement plan participation and contribution rates Provide tools and resources to help women estimate their retirement needs and manage their retirement savings Take advantage of tax incentives for saving (i.e., 401(k) deferrals, Saver s Credit, and more) Encourage women to consider long-term care insurance 21
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