Employees Ask For More Retirement Advice, Study Shows

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After three years of market volatility, employees are now re-engaging with their retirement planning and, in turn, are asking their employers for more guidance in achieving their retirement goals, according to the latest survey commissioned by the Transamerica Center for Retirement Studies.

The survey, conducted by Harris Interactive included 300 small business executives and 600 full-time small business employees ages 18 and older.

Even though 79% of employees somewhat or strongly agree that they are very involved in managing their investments, nearly three quarters of respondents (71%) agree that they don't know as much about investing as they should.

Only approximately 1-in-3 workers trust themselves to manage their retirement savings more than they trust their employer or an outside financial company (31% agree strongly). In fact, the 2003 Transamerica Small Business Retirement Survey shows that employers sense a decrease in the number of employees preferring to manage their own retirement savings rather than having it managed by their company or some other outside financial institution (50% in 2003 vs. 63% in 2002).

Among the areas where employees have greater desire for outside guidance:

  • Plan information: Employees are hungry for educational resources, with only half (54%) strongly agreeing that their employer gives them enough information on their plan.
  • Company funded plans: A more subtle shift shows a slight rise in workers who prefer to have someone else take on the burden of retirement planning, with more employees (28%) favoring company funded (defined benefit) plans than in years past (21% in 2002). “It was revealing to find that employees feel the responsibility of retirement guidance lies with the employer,” said Catherine Collinson of the Transamerica Center for Retirement Studies.

“Moving forward, it will be interesting to see how this issue plays out, considering that President Bush's Retirement Savings Accounts and Lifetime Savings Accounts proposal would place an even greater burden on workers to manage their savings without guidance or assistance from employers.”

Workplace retirement benefits remain unscathed

While the economic downturn has forced many employers to make tough decisions regarding employee compensation and benefits, retirement savings plans have come through the last twelve months relatively unscathed. The survey found that while many employers have resorted to salary freezes (24%), downsizing (32%), and the elimination of bonuses (18%) over the last year, only 5% report reducing or eliminating their retirement benefit.

“While it's no secret that workplace retirement benefits are an essential tool for helping workers plan and save for their retirement,” said Catherine Collinson of the Transamerica Center for Retirement Studies, “it is encouraging to see small business employers treating the benefits as a priority and not a perk.”

That's good news for employees, particularly since a company-sponsored plan is the only vehicle many use for retirement planning: sadly, the number of workers who save outside of a work-related retirement plan is steadily decreasing, from 61% in 2001 to 52% in 2003.

Workplace retirement benefits continue to be very important to employees. The number of workers rating retirement benefits as very or somewhat important was 91% this year (90% in 2002), still a very close second to health insurance (96%).

Disconnects remain between employers and employees

However, a disconnect remains between employers and employees about the importance of retirement benefits. More than half of employees (51%) said they would be more likely to accept a job offer that only meets their minimum salary requirements but offers excellent retirement benefits, compared to one that offers excellent salary but poor retirement benefits.

And while nearly three out of four employers (74%) believe employee-funded retirement packages are very or somewhat important in attracting new workers, fewer than one-third (30%) thought that employees would choose the job with the excellent retirement benefits over one with a higher salary and less favorable benefits.

One area where workers and employers appear to be on the same page is the type of retirement plan they prefer. Company-matched 401(k) plans are preferred by 65% of workers and 64% of employers, while a company-funded pension plan is preferred by 28% of workers and 29% of employers.

Workers re-engaging with retirement

As employees sought additional information and guidance, they showed other signs of becoming reengaged with their retirement planning:

  • Involvement in monitoring and managing: Workers are more involved in monitoring and managing their retirement savings than in previous years (79% in 2003 vs. 67% in 2002).
  • Plan enhancement recommendations: One in eight workers (12%) actually suggested to their employer new investment options or features for their plan.
  • Not putting it off: Fewer than one third (31%) either strongly or somewhat agreed that they prefer not to think about or concern themselves with retirement planning until they get closer to retirement.

Though many workers are becoming more engaged, there is a surprising percentage of workers who have stopped participation altogether over the past three years. Reported participation has dropped from 80% in 2000 to 61% in 2003.

“It is encouraging to see employees starting to take control of their retirement planning again,” said Collinson. “Greater involvement and a willingness to think about their retirement now will alleviate a lot of concern and anxiety in the future and help employees meet their retirement goals. However, there is clearly a need to re-engage the people who have stopped participating in their retirement plans altogether and educate them on the benefits of long-term investing.”

Struggling economy has little effect

The survey also revealed that the struggling economy has not caused employees to make many changes to their retirement investments. This behavior, similar to 2002, may again be due to a lack of expertise in retirement investing, conceded by the majority of employees (71%).

Over the last year,

  • Delaying retirement: Due to the economic downturn, more than one-third (38%) of employees think their retirement age will be further away than it was two years ago.
  • Asset allocation: 81% of workers did not change their asset allocation within their employee-funded retirement plan.
  • Contribution levels: 70% of workers held contributions to their retirement plans constant over the last year, only 6% reduced and just 3% stopped their contributions.

About the Transamerica Center for Retirement Studies. The Transamerica Center for Retirement Studies is charged with monitoring and analyzing employer and employee-related retirement issues in the small business retirement market, ranging from emerging retirement trends to new legislation. Prior to 2002 this survey has been conducted through Transamerica Retirement Services. The survey was conducted by telephone between August 12 and September 3, 2003 and included 300 small business executives and 600 full-time small business employees (ages 18+). The companies varied in size from 10 to 500 employees. The current and past surveys are available on the Center's Web site at www.ta-retirement.com/thecenter.

About Harris Interactive

Harris Interactive (www.harrisinteractive.com) is a worldwide market research and consulting firm best known for The Harris Poll, and for pioneering the Internet method to conduct scientifically accurate market research. Headquartered in Rochester, New York, U.S.A., Harris Interactive combines proprietary methodologies and technology with expertise in predictive, custom and strategic research.

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