Government Employees Express Fear of Outliving Retirement Income

While many government workers say their jobs’ retirement benefits are what attracted them to the position in the first place, a majority of these workers are also not confident that they are on the right track to financial security in retirement, according to new research published by MissionSquare Research Institute.

MissionSquare’s survey of 1,003 state and local government employees between October and November 2022 found that only 28% of that group are confident they will be able to retire when they want to, and only 23% are confident they will not outlive their savings.

At the same time, 86% of the survey respondents cited retirement benefits as either major or minor factors that attracted them to their current public sector job in the first place. Factors like job security and personal satisfaction also ranked highly.

Barriers to Saving for Retirement

Rivka Liss-Levinson, one of the authors of the report and a senior research manager at MissionSquare, says rising inflation and concerns about personal debt are driving a lot of the financial anxiety that public employees are experiencing.

According to the report, one in three respondents said they have a hard time paying their monthly bills on time and in full. In addition, 87% of respondents said they have one or more types of debt, and 77% of these employees said their level of debt prevents them from saving more for retirement.

“We saw very low levels of financial security … and that’s something that really can have an impact on state and local government workers, not just in terms of their financial security, but [in] how they’re able to perform at work,” Liss-Levinson says. “If they’re focused on their finances and worrying whether or not they can pay their car loan, it’s going to be a lot harder for them to provide important services.”

The most common types of debt for government employees, according to the survey, include credit card debt (61%), mortgage debt (46%), car loans (45%), student loans (26%) and medical expenses (22%).

State and local government workers reported saving for many other purposes besides retirement. The majority (58%) said they are saving in an emergency fund, whereas others reported saving for a vacation, travel or home improvements.

Joshua Franzel, managing director at MissionSquare, says these kinds of short-term goals often interfere with how much employees will save in the long-term.

MissionSquare also found that more than half (56%) of the government employees surveyed reported they are participating in a defined benefit plan through their employer, and slightly fewer (48%) are participating in a defined contribution plan. Among those participating in a defined benefit plan, 76% are fully vested, based upon their years of employment.

But outside of workers’ employer retirement plans, the potential for cuts to Social Security are a major concern, as 63% of respondents said they plan to use Social Security benefits as income in retirement.

Meanwhile, more than half of the respondents said they are worried about the government making significant cuts to Social Security before they retire. The Congressional Budget Office reported in December 2022 that it predicts trust funds used to pay for Social Security will be depleted by 2033, resulting in a 23% cut in planned benefit payments in 2034.

But Franzel also points out that there is a sizable minority of public sector workers who do not participate in Social Security. The survey found that 35% of respondents are planning to use savings from an individual IRA to supplement income in retirement.

Struggle to Retain Workers

Despite relatively positive levels of morale, 59% of respondents said they are considering leaving their jobs voluntarily for either or both of the following reasons: to change jobs, to retire or to leave the workforce entirely for the foreseeable future.

Common demographic characteristics of those considering changing jobs include people less than 40 years old, unmarried, earning a household income of less than $50,000 per year, college-educated, of Hispanic descent, not financially secure and people struggling with debt.

Liss-Levinson notes that many employees are feeling burned out and stressed due to colleagues leaving their jobs during the pandemic. These employees are often forced to take on an additional workload at their jobs, which may lower their morale and motivate them to leave.

When asked what their employers should do to help with employee retention, respondents were most likely to recommend improving salaries (74%) and increasing bonuses (54%).

Liss-Levinson says she is particularly struck by the finding that 45% of respondents said showing more appreciation and recognition for employees and they work they do was among the top recommendations for employers to help retain more people.

“[This is] a way that employers can help [with retention] without some of the red tape that you might have to go through to change compensation structures,” Liss-Levinson says.

This MissionSquare research was conducted in a national online survey in conjunction with Greenwald Research. The final data was weighted by gender, age, income and industry type to reflect the distribution of the state and local government workforce as found in the U.S. Census Bureau’s Current Population Survey and the U.S. Census of Governments.