BMO Retirement Services Comments on Key Findings From EBRI's 2013 Retirement Confidence Survey
CHICAGO, IL -- (Marketwire) -- 03/19/13 -- BMO Retirement Services provided commentary on the 23rd Annual Employee Benefits Research Institute's (EBRI) Retirement Confidence Survey, which was released this morning.
BMO Retirement Services, a sponsor of this year's EBRI study, provides services to defined contribution plan sponsors and their trusted advisors including plan design and administration, participant tools and guidance and access to best-in-class investments. With the capabilities of a North American-wide company, BMO Retirement Services helps people achieve retirement security in both the United States and Canada.
"We congratulate EBRI on the completion of their latest installment of this industry renowned survey. This year's study clearly indicates that confidence is low among workers who, now more than ever, have greater responsibility for their own retirement," said Matt Smith, Managing Director BMO Retirement Services, North America. "While employers can design plans that guide their employees' decisions, 49 percent of workers lack confidence that they will have enough money to live comfortably throughout retirement."
Smith noted a 20 percent decrease in worker confidence when compared to the 2007 report as being particularly troubling and identified several other notable findings in this year's edition that he found of interest, including:
- Workers only partially rely on government or their employer for their retirement.
With 33 percent of workers expecting Social Security to be a major source of income and only 31 percent expecting that from an employer sponsored pension, Smith noted the large gap that remains needs to be filled by personal savings, including employer sponsored savings programs.
- The percentage of workers saving for retirement is chronically low.
The study found that only 57 percent of all workers are currently saving for retirement while those with household incomes of less than $35K who report they are saving for retirement have decreased from 49 percent in 2009 to 24 percent in the 2013 survey. Smith observed that the percentage of workers saving for retirement has remained chronically low for a decade, while steadily declining over the past five years. He recommends employers use auto-enrollment in a pro-active way to get workers into a retirement plan and increase overall enrollment.
- The amount workers have saved for retirement is shockingly low.
Almost half of the surveyed workers responded that they have saved less than $10K for retirement which, using a withdrawal rate of 5 percent, equals only about $40 per month in income. "With these results being fairly steady over the past decade, it's clear that a large percentage of workers will not save without intervention," said Smith. "Encouraging employers to use auto-enrollment with workers is the first step towards bridging this gap and increasing savings balances."
- Most workers are willing to be helped.
The study found that less than one-third of workers said they would opt out of a company retirement plan if their employer were to auto-enroll them at a 6 percent contribution rate. "These results show that employees are tolerant of higher default savings rates than most employers currently use -- the most typical default rate being around 3 percent. In addition, introducing auto-escalation of contribution rates is one way to further increase retirement savings," added Smith.
- Less than half have tried to figure it out, and those who have, did it themselves.
Only 46 percent of workers said they have tried to figure out how much money they would need to save to live comfortably in retirement. With little change in response from over a decade ago, 63 percent of those workers who have tried to figure it out admitted they guessed or calculated their own estimate rather than getting help from an outside source. Smith noted, "Beyond plan design, workers need help achieving a secure retirement. That's why BMO Retirement Services provides plan sponsors with the tools and guidance their plan participants need to reach a secure financial future."
- The expected retirement age is going up, but many unexpectedly retire early.
For 88 percent of workers, their expected retirement age increased over the past twelve months. The most commonly cited reasons were the poor economy (22 percent), lack of faith in Social Security or the government (19 percent) and not being able to afford to retire (19 percent). However, when retirees were asked when they actually retired, nearly half (47 percent) said they retired earlier than expected -- of those retiring earlier than expected, over half cited health problems as a factor. Smith noted the importance of motivating people to save before they run out of time, adding, "A pro-active plan design can help workers meet their retirement goals and stay on track towards a comfortable retirement -- and the earlier, the better."
Find the full survey at www.ebri.org.
About BMO Retirement Services
BMO Retirement Services is an integral part of BMO Global Asset Management and a premiere, award-winning provider of retirement services.
BMO Global Asset Management provides holistic, solution-driven services to our institutional and high-net-worth clients. With a nearly 40-year legacy of fiduciary service -- and goal of promoting retirement readiness to our more than 500,000 participants in over 1,500 retirement plans -- our clients include retirement plans, Taft-Hartley funds, government and public funds, not-for-profit organizations and family offices. BMO Global Asset Management's commitment to service excellence has led us to be recognized by Pension & Investments as one of the Top 100 largest asset managers.
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