Saving for Retirement Ranks Ninth on List of Concerns

A survey of benefits-eligible employees was one part of Prudential’s Fifth Annual Study of Employee Benefits (Prudential also surveyed plan sponsors and benefits brokers).

In its retirement analysis, Prudential found that saving for retirement has become much less of a concern since the recession; immediate financial needs must be taken care of first. Workers’ top five concerns in 2010 are having job security (86% rate as “highly important”), making ends meet (82%), having appropriate health insurance (78%), having retirement savings last as long as you need it to (72%), and maintaining a healthy lifestyle (69%). Needing to save for retirement came in ninth on the list of 15 concerns.

These results are starkly different from a pre-recession survey. In 2007, 76% of respondents said needing to save for retirement was “highly important.” Finding a trusted source to provide financial advice has also taken a hit since the recession–in 2007, 39% of respondents said this was highly important; in 2010, 29% said so.

Proximity to retirement  

The level of importance placed on saving for retirement varies by age. The Prudential survey divided respondents into four segments, depending on when they expect to retire. The segments are:

“In the Home Stretch”: This group of workers is within five years of their planned retirement age. They are an average age of 61, and compared to others, they are more likely to have worked for the same employer their entire career. Therefore, they are more likely to have a traditional pension and retiree medical coverage. They are least likely to have any financial dependents.

“The Clock Is Ticking”: These workers have 5 to 10 years until their planned retirement. They are 54 years of age, on average, and a majority of them feel that the economy has taken its toll on their personal finances. They have limited time left and the recent recession and sluggish stock market have them feeling uneasy about their depleted savings and assets recovering before they are planning to retire.

“Still Time to Catch Up”: This employee segment, with an average age of 48, still has 11 to 20 years to get their retirement planning and saving on track, and to see their sagging account balances and other assets bounce back to pre-recession levels. These workers have also felt the sting of the down economy, perhaps even more so because 7 in 10 still have financially dependent children with high school or college tuition bills to be paid.

“Building the Nest Egg”: These employees around age 34 have more than 20 years to plan and save for their golden years. This group is most likely to have changed employers in the past 18 months and is likely to have already worked for at least three employers. They will need to rely more heavily than previous generations on their 401(k), individual retirement accounts, or other forms of savings to augment their Social Security benefits in retirement. However, these workers are also in their family formation years and have competing pressures on their time and money, including marriage, babies, and new home purchases.

Prudential found that those farthest from retirement place the least amount of importance on planning for it, even saying that for employees under age 35, it is virtually “off the radar.” “The Clock is Ticking” group, those 5-10 years from retirement, place the most importance on it, with 93% ranking “having your retirement savings last as long as needed” as highly important, and 77% ranking needing to save for retirement as highly important – these are higher percentages than for any of the other segments.

Prudential asserts that the “Still Time to Catch Up” segment (11-20 years until retirement) is most promising to be open to advice for creating a financial plan, saying that “many express concern about financial security in retirement and, fortunately, they still have ample time to do something about it, such as establishing retirement savings goals and then implementing a plan to achieve them.”

Expected retirement age  

Retirement expectations are mixed. The average expected retirement age is 63.5 and has changed little in the past few years. Younger workers (under age 35), are the most likely to say they “don't know” when they expect to retire. However, among those who do have a target age, their expectations may be unrealistic—30% plan to retire between ages 55 and 60.

Baby boomer workers who are 55 or older are perhaps in the best position to know when they will be financially able to retire. Consequently, they are the most likely to say they expect to retire between ages 61 and 70, giving them more time to build up their savings and to receive full government benefits as well. Generation X, which includes those between ages 35 and 44, are perhaps more pessimistic than other workers—21% say they don't expect to retire from full-time active work until they are at least 70.

The Fifth Annual Study of Employee Benefits: Today & Beyond survey was conducted via the Internet during April and May of 2010. Plan participant results are based on surveys conducted among 1,200 U.S. workers, age 22 or older, who are employed full time for a company with at least 50 benefits-eligible employees.