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2005 Retirement Confidence Survey
Washington -- What does it take to get workers to save more in their retirement plan? Based on the 401(k) experience, the message from workers is clear: Show me the money -- the matching money -- according to the 2005 Retirement Confidence Survey (RCS) released today.
New questions in the 15th annual RCS included a range of options that could persuade workers not contributing to their employment-based retirement savings plan to participate. Nearly three-fourths (72 percent) said an employer matching contribution of up to 5 percent of their salary would make them much more likely or somewhat more likely to participate in a retirement savings plan at work.
The survey was conducted by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Inc. and was underwritten by State Farm® and other organizations. It found that a majority of workers not contributing to their employer's retirement plan cited three other factors that also could make them more likely to participate in a workplace saving plan:
• An investment option that automatically provides workers a more conservative investment allocation as their retirement date approaches, such as the "lifestyle" funds some providers currently offer (cited by 66 percent of nonparticipating workers).
• A provision that automatically raises workers' contributions by a fixed amount or percentage when they receive a pay raise (cited by 55 percent of nonparticipating workers).
• A matching contribution by the employer of up to 3 percent of workers' salary (cited by 51 percent of nonparticipating workers).
Less than half of workers not contributing to their employer's plan backed two other options: 49 percent said they would be more likely to participate in a retirement savings plan that included a set of mutual fund investment options with a pre-set mix of conservative, moderate and aggressive investments; and 35 percent said they would be more likely to join a plan in which a professional financial manager made investment decisions based on the results of a questionnaire workers completed.
"The survey confirms that people know they need help, but feel uncomfortable asking questions about their retirement needs. They are intimidated by what they don't know, so in lieu of asking questions, they do nothing. That's the worst choice to make," said Jack North, State Farm Senior Executive Vice President of Financial Services. "The best choice is to talk to someone you know and trust to help determine your financial needs. Then act on those needs…sooner rather than later. A local State Farm agent is a good place to start."
Currently, more than 3 in 4 eligible workers (78 percent) are offered retirement plans where employers match all or part of their workers' contributions, the survey found. Eighty-two percent of eligible workers said they signed up for their employer's retirement savings plan. About two-thirds (66 percent) of noncontributing workers said automatic enrollment in a retirement plan upon being hired would make them very likely or somewhat likely to participate.
The new Retirement Confidence Survey findings are of particular relevance as Congress debates restructuring Social Security to provide voluntary individual investment accounts: Even if such accounts were created, the currently low national savings rates suggests there would be challenges getting many people to use them.
And concerning Social Security, the survey found that nearly 7 in 10 (68 percent) of today's workers are skeptical that Social Security will be able to provide them benefits of at least equal value to those current retirees receive. This proportion has remained relatively constant in recent years and did not change in the 2005 RCS, even as policymakers began discussing major changes in the federal pension system.
The RCS, first released in 1991, is a comprehensive study of the attitudes and behaviors of American workers and retirees toward saving, retirement planning, and long-term financial security. Complete RCS results are available on the EBRI Web site at www.ebri.org.
About State Farm
State Farm insures more cars than any other insurer in North America and is the leading U.S. home insurer. State Farm's 17,000 agents and 69,000 employees serve nearly 73 million auto, fire, life and health policies in the United States and Canada. State Farm also offers financial services products through State Farm Bank®. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No.18 on the Fortune 500 list of largest companies. For more information, please visit statefarm.com® or in Canada statefarm.ca.
Contact:
Mia Jazo-Harris
State Farm Insurance®
309-766-5242
Mia.Jazo-Harris.sfdx@statefarm.com
John MacDonald
EBRI
202-775-6349
macdonald@ebri.org
Variny Paladino
EBRI
510-243-0567
paladino@ebri.org |
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