American Workers are Not Well Positioned for Retirement

In 2007's Retirement Confidence Survey (RCS), published by Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, we see a substantial number of workers have been shifted from the pension system to defined contribution plans such as 401(K).  However, only 24 percent of those affected indicate that they will save more on their own, and only 8 percent indicate that they will save more in the employer's plan as a result of these changes.

Half of workers saving for retirement report total savings and investments of less than $25,000 (excluding value of their primary residence or any defined benefit plans.) The majority of workers who don't have a retirement savings account have little in savings: 7 in 10 of these workers say their assets total less than $10,000.

Another significant finding is that most workers do not understand how much Medicare, Medigap policies and the prescription drugs will cost them in retirement when the cost of health care will increase.  Only one third of workers estimated they and their spouse will need to accumulate less than $100,000 for retiree health costs and more than half (52 percent) put this figure at less than $250,000.  One recent EBRI study calculated that, assuming Medicare benefits remain at current levels, couples will need approximately $550,000 if living to age 95.  Clearly, the American work force is not saving enough to provide for retirement needs.

Employers have been eliminating retiree health benefits (and access to the benefits) in recent years because of rising costs, but more workers and their spouses said in 2007 they expect to receive retiree health insurance paid for at least in part by an employer.

In the 2007 survey, 35 percent of current retirees said they had long-term care insurance.  But other studies (not using self-reported results) show that only about 10 percent of Americans age 65 and older actually have that kind of insurance.

Source: http://www.ebri.org/surveys/rcs/2007/