More than 90 percent of U.S. workers said they find projections of retirement income somewhat or very helpful, according to a study by the LIMRA Secure Retirement Institute.
“The study suggests that workers are interested in a clear explanation of how the estimates were calculated and need additional information to provide context to the projections," Alison Salka, corporate vice president and research director for the LIMRA Secure Retirement Institute, said in a statement.
The U.S. Department of Labor is tackling the issue of how to best illustrate for Americans what their retirement savings might look like, spread out over all of the years after they stop working. More than 100 retirement industry associations, insurance companies, third-party administrators and service providers have written the DOL to share their thoughts on its proposal to include lifetime income illustrations on defined-contribution plan account statements.
The majority of respondents say they like the idea of helping plan participants better understand how their current retirement savings will translate into lifetime income upon retirement, though there's plenty of disagreement about how far the industry should be made to go.
Among workers who found income projections less than “very helpful,” almost half (45 percent) said they did not understand the calculations behind them or were unsure of their accuracy. About one-fifth (22 percent) said the projections were not more helpful because they lacked the ability to increase retirement savings. Nine percent deemed the results “too scary” and 5 percent said they didn’t want to think about retirement.
“Many consumers do not have a good idea what their currently monthly income or expenses are – a prior SRI study found that nearly a quarter felt they needed help with basic budgeting skills,” noted Salka. “This coupled with unknowns like inflation and taxes can make any retirement projections seem abstract.”
Less than half of the 2,024 workers surveyed said they had seen such a projection. Women and those making less than $75,000 per year were the least likely groups to have seen a retirement income forecast, the survey by the research and education institute based in Windsor, Conn., found.
Those who participate in a defined contribution plan were nearly twice as likely to have seen a forecast of their retirement income as those who do not (67 percent vs. 35 percent).
Almost all workers (92 percent) said the nation was facing a retirement crisis. Those contributing to a DC plan were more likely to strongly agree with that statement (53 percent) than were those not participating in a plan (44 percent). LIMRA speculated that those saving for retirement might be more aware of the problem.