Public Sector Employees Fear Having Insufficient Funds in Retirement

Workers surveyed in a new MissionSquare report expressed a lack of confidence in their employer-sponsored plans, as well as concerns about emergency savings.

The vast majority of public sector workers polled in a new MissionSquare Research Institute survey expressed concerns that they will not have enough money­ to last through their retirement years.

These employees also demonstrated a lack of confidence in their employer-sponsored retirement plans, as only 9% said the benefits provided through their employer are “sufficient” to meet their retirement needs.

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However, public sector workers find value in their retirement benefits, as 60% said retirement benefits make them more inclined to stay at their job. Meanwhile, 61% reported that other benefits like health insurance and time off also contribute to job retention.

While most state and local employees have access to defined contribution and defined benefit pension plans, public sector workers are not confident they are saving enough, especially as many struggle to pay their day-to-day living expenses, MissionSquare found.

A lack of emergency savings is also an issue for these employees, as 73% of respondents said they are worried they do not have sufficient emergency savings. Another recent MissionSquare survey found that from 2017 to 2019, 67.9% of public employees reported they would be able to come up with $400 to pay for unexpected expenses. However, emergency savings were less common among Black and Hispanic employees, as well as single women and those without college degrees.

When asked about factors preventing them from saving more for retirement, 48% of public service workers reported that current living expenses, like housing and food, were a major concern impacting their financial stability. In addition, 15% referenced their level of debt as impacting their financial security and retirement readiness.

To bolster retirement readiness, the majority (78%) of workers said they are looking for higher wages, followed by better retirement benefits and better health care benefits in retirement.

This desire for higher wages and improved retirement benefits has become almost universal for a lot of workers. These kinds of benefits are the top motivations for union workers currently on strike from Boeing,  asking for a 40% pay increase, as well as the restoration of the company’s defined benefit pension plan.

The National Institute on Retirement Security released a report on Tuesday, finding that 86% of Americans say all workers—not just those employed by state and local governments—should have a pension. According to the survey, 82% of Americans agreed that pensions are an effective way to recruit and retain qualified teachers, and 84% said pensions are a good way to attract and keep qualified public safety employees.

The average retirement benefit for public workers is about $2,428 per month, though some employees receive more or less, depending on their local cost of living, according to the NIRS.

MissionSquare also found in its survey that public employees believe they would benefit from financial education and planning information on how much to save for retirement, as well as how their employer’s retirement plan is taxed and how to identify the benefits most relevant at various stages of their career.

Employees also expressed interest in better understanding their company’s vesting schedules, how their defined contribution plan works and how their pension plan works.

“Our research underscores the need for more financial education and planning resources,” said Zhikun Liu, vice president and head of retirement research at MissionSquare Research Institute, in a statement.  “Public employees vary widely in their approaches to managing their retirement savings, from seeking advice from friends to performing their own calculations. The process of decumulation of retirement assets carries significant implications, and mistakes can dramatically impact whether employees spend down their nest egg prematurely.”

MissionSquare, in collaboration with Greenwald Research, surveyed 1,009 state and local government workers from September 13 through October 4.

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