Workers Need to Turn Retirement Saving Knowledge into Action

Americans do appear to have a fair understanding of certain personal finance concepts, and both workers and retirees agreed that they place a high degree of importance on taking key steps to save and plan for retirement, according to findings of the Voya Retire Ready Index.

However, when asked to identify the financial planning activities they had already taken, only a minority reported completing some of the primary measures that can lead to improved retirement outcomes.

A majority of workers and retirees indicated it was extremely or very important to create a holistic financial plan (87% of workers and 73% of retirees) and determine the amount of future monthly income their current savings would produce (85% and 71%). Yet, only 31% of workers and 35% of retirees have a written budget, only 36% of workers and 31% of retirees have used a web-based retirement calculator and only 17% of workers and 26% of retirees have a formal written financial plan.

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In addition to doing too little planning, workers and retirees are also not saving enough and may not have enough financial protection, the study found. Nearly half of workers (48%) and more than one-in-five retirees (21%) reported having less than $49,000 in total savings and investments. Approximately one-in-ten from both groups were not even sure how much they currently had in total savings and investments.

Lower levels of savings translated into higher concerns about covering their expenses in retirement. More than one-quarter of retirees (27%) and nearly six-in-ten (59%) workers were extremely or very concerned about outliving their savings. Workers expressed similarly high concerns about being unable to pay for their health care expenses (61%) and being a burden on their family members (51%).

The Voya Retire Ready Index was designed on the premise that successful retirement preparation involves three important components: 1) sufficient knowledge and awareness of how to prepare (“knowing”); 2) accurate and comprehensive planning activity (“planning”); and 3) adequate savings to generate sufficient income replacement (“having”). The study incorporated two surveys that were conducted with Greenwald & Associates, Inc. The surveys asked current workers (the “Workers”) and recent retirees (the “Retirees”) a series of questions related to these three retirement readiness components. Using the survey results, scores were calculated on a scale from zero to ten in each category, and then again on an overall basis to come up with a combined score.

The findings show how Americans are generally behind in their readiness, and that planning represents their most significant hurdle as well as the area with the most opportunity for improvement. Workers who were surveyed for the Voya Retire Ready Index averaged an overall score of 4.1 out of ten, while retirees averaged a 5.5.

Despite scoring in the low to middle range on the Voya Retire Ready Index, both workers and retirees reported a high level of confidence in their financial preparedness to live securely throughout retirement. The study pointed to some gaps between the current perceptions many had about their retirement security and what they ultimately might experience. This included how long they expect to live in retirement and how long they expect the income from their personal assets to last.

Nearly two-thirds of workers (65%) and eight-in-ten retirees (82%) reported feeling at least somewhat confident in their ability to live securely throughout retirement. However, nearly six-in-ten workers (59%) were extremely or very concerned about outliving their savings. And while almost two-thirds (65%) of retirees expected to live more than 20 years in retirement, only four-in-ten (40%) believed their savings would last beyond 20 years.

The Voya Retire Ready Index report is here.

PBGC Revising Reportable Events Forms

The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) extend approval of two collections of information under PBGC’s regulation for reportable events.

In a public notice of its request, the agency explains that provisions of section 4043 of the Employee Retirement Income Security Act (ERISA) and of sections 303(k) of ERISA and 430(k) of the Internal Revenue Code have been implemented in PBGC’s regulation on Reportable Events and Certain Other Notification Requirements (see “A Review of PBGC Reportable Events”). Subparts B and C of the regulation deal with reportable events, and subpart D deals with failures to make required contributions.

Approval of the forms for collection of information under subparts B, C and D expires March 31, 2015. PBGC is requesting that OMB extend its approval for three years, with modifications. According to the agency, it is developing a final rule for reportable events, and OMB approval of the current information collection will expire before the final rule is published.

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On January 23, PBGC notified the public that it intended to submit revised forms and instructions to OMB for review, and the agency received no comments about the notice. PBGC intends to revise the current forms and instructions to:

  • Require that additional supporting and identifying information be provided (e.g., separating filer’s name from title, filer’s email address, event date, notice due date, filing date, and why a filing is late, if applicable).
  • Require more description of the pertinent facts relating to an event (e.g., reason for a late contribution) and about information being included or missing with filing.
  • Add an information requirement included in the regulation to Forms 10 and 10-A (for change in contributing sponsor or controlled group event).
  • Provide enhanced instructions about the type of actuarial information required to be submitted.
  • Include a note in the Form 10-A instructions stating that PBGC typically asks for additional information (which will be specified) to be submitted within seven days (or sooner, in some cases).
  • Remove information requirements that PBGC no longer needs or can gather from public sources.
  • Require additional information for certain events (e.g., cumulative amounts missed for missed contribution events, actuarial information for liquidation events, additional loan documentation such as waivers and cross-defaults for loan default events).
  • Require a signature and certification on Form 10 and Form 10-A as to the completeness and accuracy of the contents of the filing.

The text of the PBGC’s request notice is here.

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