The 2003 Towers Perrin Retirement Study: Redefining Retirement in the 21st Century found that 78% of employee respondents plan to keep working well into their retirement years. Of those, 64% expect to work part time, while 57% plan to jump to a new occupation. In a particularly significant finding that mirrors earlier polls, more than a third (35%) of the respondents who plan to keep punching a time clock would do so because their finances compel them to. More than four in 10 (43%) will keep their hand in the workplace in order to stay involved and active in their golden years.
“Many of today’s working Americans no longer view retirement as a distinct stage of life, but instead as an extension of life’s experiences, which will continue to include work,” said Steve Kerstein, Towers Perrin principal and managing director of the firm’s HR Services business global retirement consulting practice, in a statement. “Given these findings, it is time for retirement programs to evolve to meet the needs of today’s businesses and employees.”
Still in flux are employees’ views on who is responsible for providing for their later years. In general, employees expect their employers’ retirement programs to continue, but with reduced benefit levels. Sixty percent anticipate reductions in defined benefit coverage, while 36% expect to have only savings-type retirement plans in the future. In addition, 62% expect their companies to keep shifting more of the retiree medical coverage cost onto their shoulders.
Major employers, for their part, are being forced to balance the retirement needs with today’s economic realities. Seventy-six percent of the employers believe they are obliged to help finance employees’ retirement, but still struggle with how to pay for it. For example, six in 10 of the respondents offering defined benefit pensions reported sharply higher pension expense in recent years. This explains why 93% of companies said employees would have to shoulder even more responsibility for their retirement needs.
According to the survey results, 41% of the employer respondents offering defined benefit pensions have converted to hybrid plans; 29% have eliminated defined benefit pensions for new hires, and a quarter (27%) have reduced or frozen their defined benefit plans. A similar pattern emerges among employer respondents offering retiree medical coverage, with many making small changes in their program. Forty-one percent have already slashed retiree medical subsidies for future retirees; 35% said they are likely to do so; and 69% said they have increased their current retirees’ share of medical plan costs via higher co-payments, deductibles and coinsurance.
Social Security Expectations
The workers participating in the poll also anticipate changes in both Social Security and Medicare. Regarding Social Security, 41% expect the program to continue, but with changes like delaying the start of benefits or reducing benefit amounts. Another third (28%), however, expect Social Security to be dropped altogether. Regarding Medicare, six in 10 would actually like to see the program replaced with a national health care system, although only a scant 16% realistically think that will take place. The more likely scenarios, in the eyes of the respondents, include increasing the Medicare eligibility age to match that of Social Security and keeping people from coverage above a certain income level, according to the poll.
Given these views on declining coverage, it comes as no shock that most of the respondents have no illusions about their having to take more responsibility for financing and managing their retirement resources. Half indicated they are likely to increase the amount they save through their organization’s retirement savings vehicles, and 41% plan to save more on their own.
But that doesn’t mean the workers are ready to meet this challenge of increased personal responsibility. More than half (52%) have only a rough guesstimate of their financial needs in retirement and many may actually be overconfident. On average, the employee respondents believe they will need only 62% of their pre-retirement income to meet retirement financial needs – lower than most experts’ estimates.
Asked to identify their biggest retirement concern, 52% of the employee respondents cited the cost of medical care and 40% cited declining health. Few have a clear plan for addressing these concerns, but most expected to depend on Medicare and retiree medical coverage from their employer. Another 28% said they worried about outliving their retirement savings.
The 2003 Towers Perrin Retirement Study was conducted via the Web during the fall of 2003. The survey sample included more than 2,000 employees working full time at midsize and large U.S. companies, selected at random, and more than 365 human resource executive and benefit directors representing 340 similarly sized companies.