U.S. employees’ confidence in their ability to retire comfortably continued to rebound from post-recession lows last year. However, despite growing satisfaction with their financial situation and fewer employees reporting significant declines in retirement savings, many employees remain concerned and are taking steps to get their financial houses in order, according to a new survey by global professional services company Towers Watson.
The Towers Watson survey found that the percentage of workers who said they were very or somewhat confident about having enough resources to live comfortably 15 years into retirement increased from 62% in 2010 to 68% last year. Workers, however, are less confident about living comfortably throughout retirement. Less than half (47%) of respondents said they were very or somewhat confident they will have enough resources to last 25 years into retirement. This compares with 40% who said there were very or somewhat confident in 2010.
The survey also found that fewer employees are experiencing significant declines in their pension and retirement savings – 47% in 2011 versus 55% in 2010 and 60% in 2009. Additionally, employee satisfaction with their household finances continued to improve, jumping from 33% in 2010 to 41% in 2011. Despite this upturn, three in five workers (59%) remain generally unsatisfied with their financial situation.
“As the economy shows periods of stable ground, employees are slowly beginning to be more optimistic about retirement,” said Kevin Wagner, a senior retirement consultant at Towers Watson. “However, the financial crisis was jolting to American workers. As a result, many employees are more financially conservative today and have a renewed interest in improving their financial decisions and planning and saving for retirement.”
Indeed, the survey noted after two years of cutting back on daily spending, paying off debt and saving more for retirement, some respondents plan to take additional measures this year to get their financial houses in order. These steps include further cost cutting and a sharpened focus on retirement security.
DB Plan Participants More Satisfied and Confident; Younger Workers Need to Save More ?According to the survey, the percentage of workers with defined benefit (DB) pension plans who are satisfied with their household finances jumped sharply in the past two years, from 29% to 49%. DB participants are more than twice as likely to feel “very confident” about the first 15 years of retirement and 2.5 times as likely to contemplate a 25-year retirement with confidence compared with workers with only a 401(k) plan.
A larger percentage of younger workers (under age 40) were also satisfied with their household finances last year (47%) compared with 2009 (28%). However, nearly two in three (66%) of young workers said they will need to save much more in the future to achieve a comfortable level of retirement income. Moreover, the percentage of young workers who carefully reviewed their retirement plans increased by more than 40% between 2010 and 2011.
“While the depressed economy may have triggered some of these prudent behaviors, increased attention to retirement planning, especially for younger workers, can be a helpful step for employees to save for a secure retirement,” said Bill Daniels, a senior retirement consultant at Towers Watson. “This is an opportunity for employees to make positive strides for their future. It can also be an opportunity for employers to take advantage of emerging education and planning technologies to drive up appreciation of benefits programs.”
Other findings include:
• Nearly four in ten respondents (39%) plan to delay retirement, with older employees (46%) and those in poor health (42%) most likely to retire later. The majority of workers delaying retirement (60%) expect to work at least an additional three years.
• Nearly three-fourths of respondents (74%) use their employer or plan administrator’s website for educational material to help prepare for retirement. Almost two in three (65%) use online retirement tools and educational material mailed to their home.