Benefits May 7, 2008

Lack of Health Care Weighs Heavily on Decision to Retire

May 7, 2008 (PLANSPONSOR.com) - Older workers without other health care insurance options are more likely to defer retirement to stay covered under their employer's plan, Watson Wyatt Worldwide found in a data analysis.
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According to a press release on the analysis conclusions, employees who rely on their employers for health care coverage and do not expect to receive employer-provided health benefits in retirement are 16.5 percentage points less likely to retire in any given year than workers with access to health care coverage through another source. Other health insurance sources that allow an employee to decide to retire, according to the data, include a spouse’s health insurance plan, public health insurance, COBRA coverage, or employer-sponsored retiree health insurance.

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The analysis of workers over age 50 also indicated that having only a defined benefit plan, such as a traditional pension, increases the likelihood of retirement by 4.1%. In addition, while workers’ household financial wealth has an effect on their retirement decisions, Watson Wyatt found the source of the wealth makes some difference – a $100,000 increase in expected income from a pension plan or Social Security is more likely to prompt earlier retirement than an increase in housing equity or other household financial assets.

The gradual increase of the Social Security full benefit age is also having a considerable effect on retirement decisions, according to the analysis. With the age incrementally increasing from 65 to 67, workers born in the 1940s are less likely to retire early than those born in the 1930s, the release said.

Watson Wyatt analyzed data collected from 1992 to 2004 as part of the University of Michigan’s Health and Retirement Study, a biannual survey of 22,000 older U.S. workers.

The technical paper on workers’ retirement behavior can be downloaded at www.watsonwyatt.com/retirementtiming . Registration is required.

Benefits May 6, 2008

Women Starting Retirement Planning Early

May 6, 2008 (PLANSPONSOR.com) - Whether they're Millennials, GenXers, Boomers or Matures, American women are actively considering their future retirement and financial security, according to a survey.
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A news release from Prudential Financial said 36% of Millennials (ages 25-29) and 34% of GenXers (ages 30-42) say they are already pondering their retirement nest egg. Retirement is also a top-of-mind consideration for 28% of Boomer women (ages 43-61) who participated in the study.

“The good news is that educational messages related to women ‘ s financial security appear to be resonating, “ said Christine Marcks, President of Prudential Retirement, in the announcement. “ But we ‘ ve learned over the course of eight years of research that this awareness does not always translate into action. Considering their longevity, it ‘ s critical for women to learn about financial risks they may face and how to plan for a secure retirement. “

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About eight in 10 survey respondents said they believe maintaining their lifestyle in retirement is a priority, yet few are very confident they can achieve it. A 62-point gap exists between women ‘ s confidence levels and the importance they place on this goal, the announcement said.

The poll found women rely on a trusted network for information and advice and actively seek counsel with more than half naming a financial adviser (34%) or friends and family (19%) as their most preferred sources for learning about financial products. Across the generations, an overwhelming 80% of Millennials show the most propensity for relying on friends and family for guidance, yet the Internet is equally important (79%).

In fact, the difference in using the Internet as a top resource for financial planning information is quite extreme across the generations: It drops to 67% among GenXers and then to less than half among Boomers (46%) and Matures (45%).

Although women across generations demonstrated a firm grasp of insurance products (29%) and workplace retirement plans (28%), a steady drop in understanding of mutual funds (15%), long-term care insurance (13%), and annuities (10%) occurred in relation to age – except among Matures (women ages 62+) whom Prudential said demonstrated more knowledge across the board.

According to the announcement, other highlights of the October 17 to 25, 2007, survey include:

  • One in five Boomers, GenXers, and Millennials feel " very well prepared, " for retirement compared to two in five Matures. In reporting their expected sources of retirement income, roughly two-thirds of women indicated their own personal savings over government support and/or a systematic workplace savings plan. Not surprisingly, only 35% of Millennials expect to rely on Social Security versus 91% of Matures.
  • Forty percent of women who claimed to be " ahead " in their retirement feel very well-prepared to make important financial decisions compared to 7% of those who said they are " very behind. "Ninety percent of women who consider themselves " very confident " are ahead of schedule or on track with their savings, compared to only 4% of those who said they are not confident.
  • Seventy-two percent of women admitted that procrastination affects their own personal experience. One-third of women cited family demands as the number one factor contributing to their delays in planning and saving for retirement and one in five said they put off financial planning and saving because they do not make enough money.

Prudential Financial ' s 2008 Study on The Financial Experience and Behaviors Among Women polled 1,033 American women about their financial knowledge, actions taken, and confidence in attaining their financial goals.

The study is available here .

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