Retirement Concerns Grow Among Public Sector Employees

A new report released by the Center for State and Local Government Excellence and the TIAA-CREF Institute finds only 18% of full-time public-sector workers are very confident about their retirement income prospects, down from 21% in 2012. In particular, many public-sector workers also express concern about retiree health care costs, future benefits from Social Security and Medicare, and their own saving and investing for retirement.

While 2014 confidence levels in overall retirement income prospects are generally consistent with 2012 (18% very confident, and 56% somewhat confident), there was a decrease in the proportion of public-sector employees who are either very confident or not at all confident. This year’s survey also revealed a 7 percentage-point shift of K-12 teachers from very confident to somewhat confident about their retirement income prospects.

“Fewer local and state governments offer retiree health care and public employers also are shifting more health costs to employees and retirees,” says Joshua Franzel, Center for State and Local Government Excellence vice president of research and co-author of the report. “This reality has reduced public workers’ confidence in these benefits and raises new questions about how much they need to save for health expenses in retirement. In such an environment, it is important for all state and local workers to take advantage of financial education and planning resources as well as available savings opportunities.”

Virtually all full-time state and local workers are covered by some form of retirement plan offered by their employer, but only 39% are very confident that they will receive all of the benefits that they have earned in retirement. In 2012, 72% of respondents expected to work for pay after retiring, but the figure has dropped to 49% in 2014.

Public-sector workers are concerned about federal retirement income security programs. Only 7% of state and local government employees are very confident that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today, while 55% are not confident. The same goes for Medicare benefits, with 6% reporting they are very confident and 52% saying they are not confident.

In 2012, 51% of retirement savers in the public-sector workforce said they received retirement planning advice from a professional financial adviser within the past three years. In 2014, only 38% reported receiving advice. But, this year’s report suggests more individuals are following all the investment advice they receive: 24% reported following all the investment advice received in 2014 versus 18% in 2012.

“[W]hile state and local governments address pension reform in the wake of the 2008-2009 recession, public employees can address ‘reform’ of their personal planning and saving for retirement," says Paul Yakoboski, senior economist with the TIAA-CREF Institute.

Mathew Greenwald & Associates (MGA) surveyed 1,263 individuals working in state and local government by telephone in April 2014. Of those surveyed, 507 were K-12 teachers, 102 were firefighters, 153 were police officers and 501 were in other occupations. Responses were weighted to be representative of the aggregate public-sector workforce. The survey questionnaire was developed from the framework of the annual Retirement Confidence Survey sponsored by the Employee Benefit Research Institute (EBRI) and MGA.

Full survey results may be downloaded from here.