Participants December 12, 2014

Higher Education Employees Set Example for Retirement Savings

College faculty and staff are better prepared for retirement than the general population, a survey finds.
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Employees at colleges and universities are more likely than employees in other professions to have taken concrete steps to plan and save for retirement, a TIAA-CREF survey suggests. 

In addition to saving in their employer-sponsored retirement plans, 42% of higher education employees have saved in an individual retirement account (IRA), compared to 34% of American employees overall. While 36% of college faculty and staff say they have met with a financial adviser, only 22% of the general population report the same. TIAA-CREF says the actions of higher education employees set a good example for Americans as a whole when it comes to planning and saving for retirement. 

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The survey also found that higher education employees are less likely to take loans from their retirement plans. Only 16% say they have taken a loan from their plan, compared to 29% of the general population. This employee group also is more likely to keep contributing to their retirement plans at the same rate while paying back their loan—54% say their contribution rate did not change while they repaid their loan, compared to 43% of Americans overall.

TIAA CREF Higher Ed Survey Graphic

What factors have contributed to their retirement preparedness? Nearly three-fourths (73%) of higher education employees say their employers offer a matching incentive for retirement plan contributions. Those who get matches are more likely to get a substantial match from their employer: 43% get a 5% to 8% salary match, compared to 34% of the general population.

Edward Moslander, senior managing director and head of institutional client services for TIAA-CREF, tells PLANSPONSOR that TIAA-CREF has identified four key drivers of successful retirement outcomes that plan sponsors in any industry should keep in mind:

  • Designing a plan that builds a strong foundation for retirement readiness, with features such as auto-enrollment and matching incentives;
  • Offering low-cost investment options that provide participants with lifetime income;
  • Developing an employee engagement plan that focuses on outcomes-based education and advice, delivered through channels that are relevant to employees’ life stages; and
  • Taking an approach to plan management that helps mitigate fiduciary risk, drive efficiency and maximize value.

“In the course of nearly 100 years of working with plan sponsors in higher education, we’ve seen the impact of these drivers on employee retirement readiness. In particular, the emphasis on financial education and advice seems to have served higher education professionals well—these professionals are significantly more likely to have met with a financial adviser than Americans as a whole,” Moslander says. “Many 403(b) plans, which higher education professionals are likely to have, also offer low-cost lifetime income options, such as annuities, that provide employees with a stream of retirement income they can’t outlive—an essential part of any retirement savings strategy.”

Despite their exemplary preparations for retirement, higher education professionals are not in a rush to leave the workforce, the survey found. Nearly two-thirds (64%) of higher education faculty and staff plan to retire at age 65 or older. The recent economic downturn doesn’t seem to be a factor in this decision: Nearly the same percentage (63%) of respondents say they had planned to retire at age 65 or older 10 years ago.

Even while retired, many plan to remain active. College and university employees are more likely than Americans overall to say they will work part-time (37% vs. 31%) or do more volunteer work (37% vs. 21%) during retirement.

These findings come from TIAA-CREF’s Higher Education Survey, which was conducted by an independent research firm and polled a random sample of 727 higher education professionals nationwide currently contributing to an employer-sponsored retirement plan. Statistics about the general population of adults come from a TIAA-CREF survey, also conducted by KRC Research, which polled a random sample of 1,000 adults nationwide with an employer-sponsored retirement plan.

Data and Research December 11, 2014

Financial and Emotional Planning Key to Happy Retirement

Many retirees find the retirement life brings more satisfaction and less worry than they anticipated.
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Many pre-retirees’ fears are unfounded, according to a MassMutual survey, “The Hopes, Fears and Reality of Retirement.”

Seven in 10 retirees say they are extremely or quite happy, and the experience of being retired turns out for many to be better than expected. Only about one-quarter of pre-retirees (24%) predicted a very positive experience in retirement, but almost half of actual retirees surveyed (41%) rated the retirement life as very positive.

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“The happiest retirees provide us with a roadmap for success, which is especially instructive for those who are close to embarking on the journey,” says Elaine Sarsynski, executive vice president of MassMutual Retirement Services.

Preparing for retirement is less akin to running a race and more of a long-term commitment, Sarsynski tells PLANSPONSOR.

The study finds a strong correlation between happiness and planning. The retirees who express the highest levels of contentment are the ones who took concrete steps to order both their emotional and their financial lives at least five years before retirement.

Sarsynski stresses that even retirement plan participants who are not currently on track to achieve what they might think is a necessary accumulation can still take action. One key factor is calculating the best time to start Social Security, she notes, and about three-quarters of the survey’s respondents took this step in planning their financial future.

Ten to 15 years away from retirement is a time when people can still take stock and make substantial changes, Sarsynski notes. “They may have to work longer, downsize, look at their living situation and curb expenses,” she says. “They also have to examine expectations, but they have time to save more under ERISA [Employee Retirement Income Security Act] catch-up rules and enhance savings opportunities.” 

 

Taking concrete financial steps helped retirees to feel more financially secure in retirement, the study finds. Six in 10 (58%) retirees who were most satisfied with their situation worked with a financial adviser before retirement.

Jean Setzfand, vice president of financial security at AARP, encourages retirement plan participants to dig deeper and think of saving for retirement the way they think about exercise, and focus on more than simply accumulating assets. However, “It’s not just about the money,” she tells PLANSPONSOR, noting that the research points out necessary steps for planning people’s emotional as well as financial lives.

The survey’s results are a prescription, Setzfand says, for people to see what successful retirees have done, but it is critical for people to know first what they want and need in order to get the money right. “Planning your life first and understanding what you want out of retirement often propels people to make the money work for them,” she says.

While retirees in the study had household assets between $250,000 and $600,000, they tended to report that their satisfaction and happiness stemmed from spending time with family and grandchildren. “Retirees told us they cherish the newfound time they spend with their grandchildren,” Sarsynski notes.

According to the study, those who began focusing on their relationships—building stronger connections to their spouse or significant other, reaching out to old friends or making new friends, and pursing new interests—were more likely to enjoy retirement.

“MassMutual’s research on retirees and pre-retirees tells us that retirement can be and should be an extraordinarily happy time in our lives as long as we start to strengthen our emotional bonds and exercise financial planning discipline well before we plan to retire,” Sarsynski says.

The study was conducted by Greenwald & Associates, on behalf of MassMutual, examining pre-retirees' expectations and preparations for retirement, and how those plans and visions compare to the actual experiences that people have after they retire. The research was conducted in two parts: a survey of pre-retirees and retirees, and four focus groups (two of retirees only and two of pre-retirees only). The study surveyed 1,817 pre-retirees and retirees who were either one to 15 years into retirement or one to 15 years away from retirement. Respondents were required to be at least 40 years old, have at least $50,000 in savings and investments, and at least share a role in the household’s financial decision-making.

“The Hopes, Fears and Reality of Retirement” can be downloaded from MassMutual’s site.

 

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