2013 Retirement Confidence Survey Mathew Greenwald Mathew Greenwald & Associates Presented to American Savings Education Council Washington, DC April 10, 2013

2013 RCS Methodology 23 rd annual measure of worker and retiree confidence about retirement 1, minute phone interviews conducted in January 2013 using random-digit dialing with cell phone supplement Interviewed Americans ages 25 and over Two questionnaire versions - 1,003 interviews with workers (not retired) interviews with retirees 2

DECLINING RETIREMENT CONFIDENCE

Worker Confidence About Having Enough Money for Retirement Resumes Slow, Downward Trend Overall, how confident are you that you (and your spouse) will have enough money to live comfortably throughout your retirement years? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 4 28% 21% 38% 13% 10% 19% 43% 27% 17% 18% 41% 22% 8% 19% 51% 21%

Roughly 4 in 10 Workers Believe They Need to Save 20% or More of Their Income to Comfortably Retire About what percentage of your total household income do you think you (and your spouse) need to save each year from now until you expect to retire so you can live comfortably throughout your retirement? (2013 Workers who plan to retire n=931) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 5

One-third of Workers Have Dipped into Savings to Pay for Basic Expenses In the past 12 months, have you (and your spouse) had to dip into your savings to pay for basic expenses? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 6

6 in 10 Workers Report a Problem With Debt Thinking about your current financial situation, how would you describe your level of debt? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 7

Only Half of Workers Are Confident They Could Come Up With $2,000 for Unexpected Need How confident are you that you could come up with $2,000 if an unexpected need arose within the next month? Do you think you definitely could, probably could, probably could not, or definitely could not come up with the full $2,000? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 8

The Percentage of Workers Not at All Confident About Having Enough for Basic Expenses Continues to Increase How confident are you that you will have enough money to take care of your basic expenses during your retirement? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 9

Worker Confidence About Paying for Medical Expenses in Retirement Continues to Decline How confident are you that you will have enough money to take care of your medical expenses during your retirement? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 10

The Percentage of Workers Not at All Confident About Paying for Long-term Care Reaches New High How confident are you that you will have enough money to pay for long-term care, such as nursing home or home health care, should you need it during your retirement? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 11

Worker Confidence About Doing a Good Job Preparing for Retirement Continues Slow Decline How confident are you that you are doing a good job of preparing financially for your retirement? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 12

SAVINGS FOR RETIREMENT STEADY BUT LOW

Workers Calculating Retirement Needs Up Slightly in 2013, Steady Since 2000 Peak Have you (or your spouse) tried to figure out how much money you will need to have saved by the time you retire so that you can live comfortably in retirement? (2013 Workers n=1003, percent yes) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 14

Many Workers Guess to Determine Savings Needed for Comfortable Retirement How did you (or your spouse) determine this amount? Did you…? (2013 Workers giving an amount needed for retirement) (Top mentions, multiple responses accepted) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 15

The Share of Workers Having Saved for Retirement Holds Steady at About Two-thirds Not including Social Security taxes or employer-provided money, have you (and/or your spouse) personally saved any money for retirement? These savings could include money you personally put into a retirement plan at work. (2013 Workers n=1003, percent yes) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 16

But There Has Been a Severe Decline in Retirement Saving Among Lower-income Workers Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 17 Not including Social Security taxes or employer-provided money, have you (and/or your spouse) personally saved any money for retirement? These savings could include money you personally put into a retirement plan at work. Workers with Household Incomes <$35,000 Workers with Household Incomes $35,000-$74,999 Workers with Household Incomes $75,000+

The Percentage of Workers Currently Saving for Retirement Continues Slow Decline Are you (and/or your spouse) currently saving for retirement? (2013 Workers n=1003, percent yes) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 18

Proportion of Workers With Less Than $10,000 of Savings up Ten Percentage Points Since 2008 In total, about how much money would you say you (and your spouse) currently have in savings and investments, not including the value of your primary residence? (2013 Workers n=1003) Less than $1,000 55% 36% 20%27%29%30%28% $1,000 - $9, $10,000 - $24, $25,000 - $49, $50,000 - $99, $100,000 - $249, $250,000 or more Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 19

Cost of Living and Affordability Predominant Reasons Workers Don’t Contribute More to DC Plan What is the main reason you are not currently contributing (more) money to the plan? (2013 Workers offered employer-sponsored retirement savings plan n=510) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 20

6 in 10 Workers—Including Half of Nonsavers—Said They Could Save More for Retirement in 2011 RCS Do you think it is reasonably possible for you to save $25 a week (more than you are currently saving) for retirement? (2011 Workers n=1004, percent yes) If yes: What would you cut back on or give up to save that (extra) $25 a week? (n=674, top mentions) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Retirement Confidence Survey. 21

Most Not Offered DC Plan Would Continue Contribution Even if 6% Withheld Through Auto-Enrollment Suppose your employer automatically enrolled you into a retirement savings plan, withholding 3%/6% of your pay each pay period to contribute to your account. Do you think you would be most likely to… ? (2013 Workers not offered plan n=162) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 22

EXPECTATIONS ABOUT RETIREMENT: REALISTIC OR NOT?

The Age at which Workers Expect to Retire Has Increased Steadily Since 1991 Realistically, at what age do you expect to retire? (2013 Workers n=1003) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 24

More than One-third of Workers Expect to Retire After Age 65; Just 1 in 7 Retirees Retired Then Realistically, at what age do you expect to retire?/How old were you when you retired? Median Workers65 Retirees62 Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 25

Nearly Half of Retirees Indicate Their Retirement Occurred Earlier Than Planned Did you retire earlier than you planned, later than you planned, or about when you planned? (2013 Retirees n=251) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 26

People Retire Early for a Variety of Reasons, Though Over Half of Retirees Cite Health Problems as a Factor Why did you retire earlier than you had planned? (2013 Retirees retiring earlier than planned n=127) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 27

Workers Are Much More Likely to Think They Will Work in Retirement Than Retirees Actually Worked Do you think you will do any work for pay after you retire?/Have you worked for pay since you retired? (2013 Workers expecting to retire n=931, Retirees n=251) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., Retirement Confidence Surveys. 28

Compared with Retirees, Workers Are More Likely to Plan to Rely on Personal Savings for Income in Retirement I’m going to read you several possible sources of income in retirement and I’d like you to tell me whether (you expect it to be/it is) a major, minor, or not a source of income in retirement. (2013 Workers planning to retire n=1182, Retirees n=251) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2013 Retirement Confidence Survey. 29 Employer-sponsored retirement savings plan Other personal savings and investments Social Security Individual retirement account or IRA Employer-provided traditional pension or cash balance plan Employment

Interpretive Comments A grim picture, but heartening evidence we have learned – Found that defaults work – Evidence of more realism on savings from workers, hopefully a first step Now, focus on more defaults and more effective defaults – Auto enroll at 5%-6%, auto escalate for five years – More use of commitment devices 30

Interpretive Comments Focus on more effective use of accumulations – Gamma can produce 29% more retirement income Focus on more effective Social Security claiming Don’t let expectation of longer work forgive need for accumulation – Two targets, one at age 60 the other at target retirement age Need more effective mileposts for on-track accumulation Culture of spending should be addressed “Hyper-discounting” should be addressed 31