According to a Principal news release, retirees were even less realistic, with 73% percent saying they’ll need less than 80% percent of their working income to live throughout retirement years.
“The fact that an increasing number of workers and retirees are beginning to understand the importance of long-term financial security is a step in the right direction,” said Dan Houston, executive vice president, Retirement and Investor Services, The Principal, in the news release. “But it’s alarming to see that workers still grossly underestimate the 85% of pre-retirement income they should be saving toward retirement.”
Health care costs are among the largest expense for many retirees, Houston said, and retiree health care benefits are causing increasing concern for both retirees and employees. According to the survey, half of workers said their current or past employer does not offer retiree health care benefits.
Surprisingly, one-third of workers (33%) and 28% of retirees said they have no safety net in place if their employer-sponsored retiree health care benefits are eliminated. Many workers (37%) and retirees (30%) indicated they have a savings account should they lose their retiree health care benefits, but an alarming number (36% of workers and 32% of retirees) would have to dip into their retirement nest egg.
Many American workers are apparently falling down when it comes to the necessary financial planning for retirement financing. When asked about financial planning checkups, 41% of retirees and 40% of workers indicated they have never had one. Two-thirds of both workers (66%) and retirees (67%) indicated they have not had a financial analysis conducted on any of several financial planning areas in the past three years, including retirement savings, life insurance, and savings goals.
In general, however, American workers are more confident when it comes to achieving “the American dream” than a year ago.
While more than half (56%) of workers agree that the American dream has been or will be harder to achieve than it was for their parents, the number has decreased significantly from the third quarter of 2005 when 70% of the workers indicated that it would be more difficult for them to achieve the American dream.
According to the announcement, for the first time since 2004, half of workers (49%) listed their long-term financial future as being more important than their current job security (39%). The index also reveals that nearly half of workers (47%) are not at all concerned about their current job security, suggesting they are not worried about layoffs and are secure in their jobs.
Three-fourths of workers (78%) indicated that their feelings about job security are not causing them to make any changes to their future career, and nearly two-thirds (61%) of the workers said they have no concerns about the future of their company.
Principal commissioned Harris Interactive to conduct online research with employees (aged 18-plus) of small and midsized U.S. businesses (firm size 10 – 1,000 employees) about their attitudes and perceptions regarding their financial well-being and their current employee benefits.
To compare responses, Harris Interactive also interviewed a group of retirees. Harris Interactive conducted The Principal Financial Well-Being Index survey of 1,137 employees and 548 retirees from May 1 through May 7, 2007, using the Harris Poll Online.