Study Finds Employees Unprepared for Retirement

The greatest fear amongst employees is outliving their savings, according to Met Life’s 2003 Employee Benefits Trend Study. Nearly half the workers polled said they believe they will have to take on full or part-time jobs to maintain financial stability in retirement.

“Most people greatly underestimate the likelihood of living beyond average life expectancy and how much money they will need in retirement,” said Beth Hirschhorn, chief marketing officer for Met Life’s U.S. insurance and financial services businesses. “Met Life’s Employee Benefits Trend Study amplifies that the vast majority of pre-retirees lack the basic education to plan for a secure retirement.”

Conducted during the third quarter of 2003, the study consisted of two distinct surveys. More than 1,500 human resource and benefits executives from companies with at least two employees were polled for the “employer” survey. The second survey, which polled “employees,” had an even mix of 728 men and women drawn from a diverse pool of ethnic backgrounds ranging in age from 21 to 69 years old. All participants were employed full-time with companies that had at least two employees.

The first poll, which surveyed employers, focused on identifying overall objectives and strategies pertaining to benefits, monitoring financial products and services offered in the work place and assessing voluntary benefits issues, including job satisfaction.

The employees’ survey centered on assessing basic financial security, what benefits they had, how their benefits-needs were addressed and identifying the channels used to obtain information related to financial planning.

The results of this study indicated employers’ most important objective when reviewing benefits was to control and reduce the cost. Their key strategy to reduce cost was to shift more of the cost to employees, while offering a wider array of voluntary benefits.

Aside from outliving retirement savings, the study found three major areas of concern with regard to basic financial security for employees.

Topping the list was health insurance for themselves and their families at 76 percent, followed closely by job security at 71 percent and the ability to “afford a living” at 69 percent. Three quarters of employees polled had basic term life insurance, and most of them said the amount they had was adequate. However, among the “prime needs segment,” defined as those with financially dependent spouses and or children under 18, two-thirds had savings less than sufficient for approximately five years past retirement. In addition, half had done no planning to prepare for premature death or disability.

“Alarmingly, among employees in the 41 to 60 age group, many of whom are on the brink of retirement, only 4 percent have reached their retirement goals,” said Hirschhorn.

Thirty-nine percent of the employees polled were unable to estimate their annual income needs for retirement, and just less than half did not know how many years past retirement they should plan to save for. The amount of employees confident in their ability to make sound financial decisions for themselves and their families registered at around one-third. Yet, despite the majority lacking confidence in planning, many did not seek professional help. The most popular channel through which employees sought to obtain information related to financial planning was through the advice of friends and relatives at 46 percent. One-third of them consulted an insurance agent, while only a quarter had met with a financial planner.

In addition, the study showed a decreasing number of retirement planning services offered, down 3 percent from 2002. Education on 401(k) plans was down as well, 7 percent from the year before. The downward trend in preparedness seems to be exacerbated by the lack of training offered by employers. “Without trustworthy investment education readily available, employees are likely to continue being unprepared for retirement, whether it’s from lack of motivation or from consulting dubious sources of information,” said Steve Herrmann, vice president and head of Met Life Advice.

Dissatisfaction with current benefits among employees is high, according to the study. Only 32 percent of employees polled expressed satisfaction with their benefits, compared to 41 percent in 2002. The demographic profile of those studied consisted of 49 percent males and 51 percent females. Comprisal of ethnic background was 4 percent African American, 3 percent Asian, 86 percent Caucasian, 3 percent Hispanic and 4 percent other or no response. Most were married, 20 percent were never married, 12 percent were divorced and 3 percent separated. Six percent had domestic partners, while 1 percent of the demographic was widowed.

The study demonstrated that employees in general have difficulty with regard to financial planning and are concerned about health insurance, job security and the ability to get by. Skills necessary to address financial planning concerns were lacking, yet most did not seek professional help. It was also established that most employees had inadequate protection for their families in the event of a premature death or a disability.