Benefits March 28, 2006

Nest Egg Study Shows Lack of Preparedness for Retirement

March 28, 2006 (PLANSPONSOR.com) - A survey conducted by Harris Interactive for the A.G. Edwards Nest Egg Score found that, among US adults not yet retired but planning to, 58% do not know what size their nest egg will need to be to live comfortably in retirement.
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In addition the survey found, among those nearing retirement (aged 55 or older), 41% do not know how big their nest egg will need to be to support them when they retire, a news release said.

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Perhaps as a result of this lack of knowledge, A.G. Edwards said in the release, 69% of survey respondents who plan to retire are concerned about their ability to live comfortably in retirement. Almost half (49%) of those already retired said the same thing.

When asked to identify the biggest obstacles to starting or building a nest egg, respondents, regardless of whether or not they are retired, identified:

  • the cost of covering day-to-day living expenses (55%),
  • too little income (48%),
  • too much debt (28%),
  • the cost of raising children (24%), and
  • medical expenses (21%).

Reigning in current living expenses and debt ranked higher in priority for respondents than saving for retirement. Only 17% said increasing their pre-tax savings in an employer-sponsored retirement plan was a priority.

Harris Interactive fielded the online survey on behalf of A.G. Edwards between March 14 and March 16, 2006, among a nationwide sample of 2,182 US adults 18 years of age or older, of whom 1,013 are not retired but plan to retire, and 406 are retired.

For a more detailed description of the A.G. Edwards Nest Egg Score and a list of the factors used to calculate it, visit www.nesteggscore.com .

Benefits March 27, 2006

Study: Employee Savings Habits will Delay Retirement

March 27, 2006 (PLANSPONSOR.com) - An Aon Consulting survey of 1,071 US employers found that 39% believe half or more of their workforce will not have enough savings to retire between the ages of 62 and 65.
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Employers in certain regions were even less optimistic, an Aon news release said. Forty-three percent in the Central region and 41% in the Southeast saying the majority of their employees will not retire at a traditional retirement age, based on savings habits.

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In addition, the study shows that 74% of organizations with 401(k), 403(b) and 457 plans say half or more of their employees contribute to these plans; however, only 19% of these companies believe their workers truly understand how to invest in plan assets. Sixty-three percent of respondents said their workforce has some understanding of defined contribution investment principles, but 18% believe their workers have little or very little knowledge on the topic, according to the release.

Few companies in the study are modifying their retirement plan designs to help employees with their challenges. Only 20% of companies are actively reviewing their retirement plans, while 80% are not considering near-term changes. Additionally, even though 76% of organizations believe retirement education is important, very important or absolutely critical, only 1% say financial or retirement planning information is communicated to employees on a regular basis.

Aon cites employee communications inefficiencies as a factor in the savings problem. “While most employees realize they should save more for retirement, the problem is they don’t know how much more,” said Bill Crawford, senior vice president with Aon Consulting, in the release. “Workers are left to interpret well-meaning, but nonspecific, retirement information, based on their own circumstances, which is a process that paralyzes many.”

One way companies are helping employees boost their retirement savings, though, is through employer match contributions. This survey found that 85% of organizations make contributions to employee 401(k), 403(b) and 457 plans to a certain level. Twenty-nine percent of companies offer a 100% match on employee contributions up to a certain level of compensation, while 7% provide a 75% match and 39% of employers provide a 50% match.

Other study findings included:

  • The most popular retirement plans employers offer include 401(k) (63%), defined benefit (23%) and 403(b) (15%).
  • Nearly 85% of organizations have 10 or more investment options in their defined contribution plans.
  • More than 85% of companies allow for loans through their defined contribution plans.
  • Nearly 90% of retirement plan participants use Web-based retirement planning tools.
  • Fifty-eight percent of employers offer retirement plan participants personalized advisor-based retirement planning tools.

Copies of the study are available by calling 800-438-6487.

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