Continuing a two-year decline in retirement confidence, only 18 percent of workers said they are very confident they will have enough money to retire, the Employee Benefit Research Institute reported in its April 2009 Retirement Confidence Survey.
The lack of confidence has forced workers to shift plans and to stay at their jobs longer. Half of workers 50 or older say they plan to work one year past the typical retirement age of 65, a June 2009 survey by Watson Wyatt Worldwide (now Towers Watson) found. Three-quarters of these workers say they need to work longer because of insufficient retirement funds. EBRI’s research on the same issue found that 36 percent of the workers who are delaying retirement cited the poor economy, and 28 percent said they needed to make up stock market losses.
“If any good has happened with this market downturn, maybe it’s waking up individuals” to analyze whether they are ready to retire, says Jack VanDerhei, research director for the institute.
But worker and employer attitudes are slowly shifting toward very cautious optimism, says Julie Stich, senior information/research specialist for the International Foundation of Employee Benefit Plans. The group surveyed employers and employees at three critical points during the recession and found that in September, 40 percent believed the worst of the crisis was over. At that same point in time, nearly 90 percent agreed or strongly agreed that the road to economic recovery would be much slower than in previous recessions.
“Even though the ball is in the participants’ court, employers need to do a better job in talking about how to make money last in retirement,” Stich says. “Hopefully employers are going to restore matching contributions, but the recovery is probably going to be slow. Everyone is still struggling.”
But depending upon where people work, the situation may not be so bad, says Tom Kmak, CEO of Fiduciary Benchmarks. Kmak’s company recently crafted a retirement readiness index for 21,000 401(k) retirement plans with a collective $2.1 trillion in assets and more than 33 million employees. The index showed that overall, workers at American companies are 92 percent ready to retire.
“The ideal number is 100,” Kmak says. That score means “you’ve got enough money to maintain your pre-retirement living,” he says.
The index breaks down the American workforce by industry, and then again by company. Companies in the financial services industry scored 89 percent readiness, for example, while workers at petroleum and coal mining companies are 120 percent ready to retire.
Fiduciary Benchmarks hopes companies and employees will use the index as a starting point to determine how fit workers are for retirement. Depending upon what number the company reaches, employers and employees can make adjustments to strengthen readiness.
Workforce Management, January 2010, p. 25 -- Subscribe Now!