Data and Research September 3, 2015

Half of American Workers Lack a Plan for Retirement

And 40% say they feel they are ill prepared for retirement because of inadequate savings.
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Fifty-five percent of American workers do not have a plan for their retirement, LifeCare and the Financial Planning Association (FPA) found in a survey. 

Sixty-seven percent of those not saving for retirement say they do not have the resources to do so after taking care of their everyday expenses, such as housing, transportation, food, household items, credit repayment and eldercare, and 24% do not have any idea of how to begin.

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While American workers seem to feel confident about their short-term finances, their outlook on the long term is shaky. Sixty-two percent believe they have a good handle on housing costs, debt management (61%) and saving/spending (56%). When asked what they would speak to a certified financial planner about, 56% said to figure out how much they need to save for a comfortable retirement, 50% pointed to retirement preparedness and 40% noted how much to save in a 401(k) plan.

American workers are split in their opinions towards saving, with 25% saying saving and spending are a source of confidence and 26% saying these are a source of stress. Forty percent say they feel they are ill prepared for retirement because of inadequate savings.

While 60% of respondents are in the key savings ages of 45 to 64, 55% do not have a plan in place for retirement. Among the 45% who do have a plan in place for retirement, only 20% are working with a financial planner.

Nonetheless, 83% believe that working with a financial adviser would be beneficial, but misconceptions prevent them from doing so. The biggest one is that they cannot afford one (cited by 44%), followed by no idea of what a financial planner does (17%), thinking that they do not have enough assets (15%) and thinking their financial situation is not complex (13%).

Nearly half of those surveyed (48%) were automatically enrolled into their employer’s retirement plan. However, LifeCare and FPA said, American workers should not rely solely on their retirement plan. They should be saving additional money outside of the plan.

The report is based on a survey of 1,389 American workers conducted between June 15 and July 10. The full findings of the “2015 LifeCare/FPA Financial Confidence of American Workers Survey” can be downloaded here.

Administration September 3, 2015

Pensions Lost Ground with Negative Returns in August

The aggregate funded ratio for U.S. corporate pension plans decreased nearly 3%.
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The aggregate funded ratio for U.S. corporate pension plans decreased to 83.3% for the month of August, according to Wilshire Consulting, the institutional investment advisory and outsourced-CIO business unit of Wilshire Associates Incorporated.

The decrease in funding was the result of a larger decrease in asset value compared to the decrease in liability value.

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“We estimate that overall the funded ratio for the plan sample decreased by 2.8% from 86.1% in July to 83.3% in August,” says Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting. “The decline in funding levels was driven by a 0.9% decrease in liability value versus a 4.2% decrease in asset value. The asset result is due to negative returns for most asset classes, while the liability value declined due to a slight increase in corporate bond yields.”

The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2015 corporate funding study. The most current month end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index.

The assumed asset allocation is:

  • U.S. Equity – 32%;
  • Non-U.S. Equity – 21%;
  • Core Fixed Income – 18%;
  • Long Duration Fixed Income – 27%; and
  • Real Estate – 2%.

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