1. 1 Retirement Trends The Latest Findings on the Attitudes and Behavior of the American Worker Toward Retirement Dallas L. Salisbury, Employee Benefit Research Institute www.ebri.org for Transamerica, October 30, 2002 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute

2. 2 12th Annual Retirement Confidence Survey 2002 Employee Benefit Research Institute American Savings Education Council 2121 K Street NW, Suite 600 Washington, DC 20037 Phone: (202) 659-0670 Fax: (202) 775-6312 Mathew Greenwald & Associates, Inc. 4201 Connecticut Ave. NW, Suite 620 Washington, DC 20008 Phone: (202) 686-0300 Fax: (202) 686-2512

3. 3 Attitudes About Finances and Saving

4. 4 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Worker & Retiree Attitudes about Saving for Retirement W R W R W R W R W R I think anyone can have a comfortable retirement, if they just plan and save. I feel it is/felt it was pointless to plan for retirement because it is/was too far away to know what I will/would need. (I thought) if I just save(d) some money each month I will/would be fine in my retirement. I think preparing for retirement takes too much time and effort. I am more of a saver than an investor. Please tell me how well each of the following statements describes you. Would you say that it describes you very well, well, not too well, or not at all? Workers (n=775) Retirees (n=225) 71% 68% 54% 66% 39% 47% 16% 26% 13% 21%

5. 5 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Personality Types Among those providing responses to all segmentation questions (n=988) Planners Disciplined savers and financial risk- takers, they enjoy financial planning and believe anyone can have a comfortable retirement if they just plan and save. Impulsives They believe a comfortable retirement is possible and many are willing to take financial risks, but they are not disciplined savers. Instead, they are prone to impulse buying and financial setbacks. Deniers Disliking financial planning and seldom planning ahead even for more immediate financial concerns, they do not feel that a comfortable retirement is within their reach. Strugglers Sometimes impulse shoppers, they are frequently set back by unexpected events. Many consider themselves disciplined savers, but the struggle this involves makes them cautious with their savings. Savers Careful with their money, they are seldom set back by unexpected events. But their risk-averse behavior makes them savers rather than investors.

6. 6 Retirement Expectations

7. 7 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Realistically, at what age do you expect to retire? Workers (n=775) How old were you when you retired? Retirees (n=225) Planned and Actual Retirement Age

8. 8 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Did you retire earlier than you planned to, retire later than you planned to, or retire about when you planned to? Retirees 2002 (n=225) Timing of Retirement

9. 9 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Change in Expected Retirement Age (multiple responses accepted)(n=70) Want to make sure am financially secure22% For health or disability reasons15% Will have to work longer to make up for losses in stock market8% Economy/ cost of living7% Social Security will not be there for me7% Company downsizing/ offering early retirement/ closing5% Eligibility age of Social Security is increasing4% To spend more time with family3% Other36% In the past year, has the age at which you expect to retire changed? If yes, is it likely you will retire earlier or later than you previously thought? Why has it changed? Workers age 45 and older 2002 (n=304) Don’t know/ Refused 4%

10. 10 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute For how many years do you expect to be retired? Workers planning to retire (n=734) At the time that you retired, how many years did you expect your retirement to last? Retirees (n=225) Expected Length of Retirement

11. 11 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Working in Retirement Do you think you will do any work for pay after you retire? Workers planning to retire 2002 (n=734) Have you worked for pay since you retired? Retirees 2002 (n=225)

12. 12 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Major Reasons for Working After Retirement Is... a major reason, a minor reason, or not a reason why you think you will continue working after you retire? Workers planning to work for pay in retirement (n=486) Is... a major reason, a minor reason, or not a reason why you worked after you retired? Retirees working for pay in retirement (n=53) Wanting money to buy extras Wanting money to make ends meet Keeping health insurance or other benefits You enjoy working and want to stay involved Helping support children or other relatives Trying a different career

13. 13 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute About what percentage of your pre-retirement household income do you think you (and your spouse) will need to live comfortably in retirement? By pre-retirement income, I mean your household income right before you retire. Workers 2002 (n=775) Expected Replacement Needed for Pre-Retirement Income

14. 14 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Do you expect it will be a major source of income, a minor source of income, or not a source of income in your (and your spouse’s) retirement? Workers (n=775) Major sourceMinor sourceNot a sourceDon’t know/Refused PensionEmployee contrib. to retirement plan at work Employer contrib. to retirement account Social Security EmploymentSale of home or business Other government programs Support from children/ other family Other personal savings Expected Sources of Income in Retirement for Workers

15. 15 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Is it a major source of income, a minor source of income, or not a source of income in your (and your spouse’s) retirement? Retirees (n=225) Major sourceMinor sourceNot a sourceDon’t know/Refused PensionEmployee contrib. to retirement plan at work Employer contrib. to retirement account Social Security EmploymentSale of home or business Other government programs Support from children/ other family Other personal savings Actual Sources of Income in Retirement for Retirees

16. 16 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute And which source do you think will provide you (and your spouse) with the largest share of income in retirement? Workers (n=775) And which source provides you (and your spouse) with the largest share of income in retirement? Retirees (n=225) PensionEmployee contrib. to retirement plan at work Employer contrib. to retirement account Social Security EmploymentSale of home or business Other government programs Support from children/ other family Other personal savings Expected and Actual Largest Share of Income in Retirement

17. 17 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Having enough money to take care of basic expenses Overall standard of living Having enough money to cover medical expenses Has your actual experience in retirement in terms of... been better or worse than you expected at the time you retired? Retirees 2002 (n=225) Reality vs. Expectations for Retirement 2001 2002 2001 2002 2001 2002

18. 18 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Reason Standard of Living Worse than Expected in Retirement You said your overall standard of living is worse than you expected at the time you retired. Why do you say that? Retirees saying their overall standard of living is worse than expected (n=42) General expenses were higher than expected Had unexpected medical expenses Thought Social Security/ pension benefits would be higher Thought Medicare would cover more Unable to find employment/ lost employment Investments not doing as well as expected Other Don’t know

19. 19 Planning & Saving for Retirement

20. 20 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Attempted to Do a Retirement Savings Needs Calculation Have you 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? If married, has 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? Workers 2002 (n=775)

21. 21 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Method Used to Determine Retirement Savings Needs How did you determine the amount you would need to save by the time you retire? Workers trying to do a retirement needs calculation (n=291) Estimated amount based on economy, inflation, earnings Amount calculated by financial advisor Completed worksheet/ did calculation Guessed Read/ heard that is how much needed Other Don’t know

22. 22 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Retirement Savings Calculation Led to Change in Behavior Did you make any changes in your retirement planning as a result of trying to figure out the amount you will need to have saved by the time you retire? If yes, what changes did you make? Workers trying to do a retirement needs calculation (n=291) (n=130) Started saving more Changed allocation of money Researched other savings methods Started working more Other (multiple responses accepted)

23. 23 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Changes in Economy Led to Change in Behavior Did you make any changes to your retirement planning and preparations as a result of the changes in the economy and financial markets that have occurred during the past year? If yes, what changes did you make? Workers trying to do a retirement needs calculation (n=291) (n=69) (multiple responses accepted) Started saving more Changed allocation of money Researched other savings methods Started working more Other Started saving less

24. 24 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Currently Saving for Retirement Are you (and/or your spouse) currently saving for retirement? Workers having personally saved for retirement 2002 (n=554)

25. 25 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Employer Contributed to Retirement Savings Account Last year, did an employer contribute any money to a retirement account in your name (or your spouse’s name)? Workers 2002 (n=775)

26. 26 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Total Amount Accumulated for Retirement As of today, how much money in total do you (and your spouse) have accumulated for your retirement? Workers (n=775) At the time you retired, how much money in total did you (and your spouse) have accumulated for your retirement? Retirees (n=225)

27. 27 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Confidence in Retirement Savings Investments How confident are you that you (and your spouse) are investing your retirement savings wisely? Workers having some retirement savings 2002 (n=662)

28. 28 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Savings or Investments Other Than for Retirement Besides what you may have put aside for retirement, do you currently have any other savings or investments? Workers 2002 (n=775) Retirees 2002 (n=225)

29. 29 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Perception of Retirement Planning & Saving Progress And when it comes to planning and saving for retirement, would you say that you are on track, ahead of schedule, or behind schedule? Is that a little ahead of/behind schedule or a lot ahead of/ behind schedule? Workers (n=775)

30. 30 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Able to Save $20 Per Week (More) for Retirement Do you think it is reasonably possible for you to save $20 per week (more than you are currently saving) for retirement? Workers (n=775) Savers (n=554) Nonsavers (n=220)

31. 31 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Savings Vehicles Used to Save for Retirement Please tell me whether you have ever used each of the following to save for your retirement. Workers who have saved for retirement 2002 (n=554) A work-related retirement savings plan NA Other savings or investments set aside for retirement An IRA Keogh account Cash in a safe place at home or safe deposit box 200220012000

32. 32 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Availability of & Participation in Retirement Savings Plan at Work Does your current employer offer you a retirement savings plan that allows you to make before-tax contributions from your salary to an individual account set up in your name? If yes, do you contribute to the plan? Workers employed full or part-time (n=566) (n=373) OfferedParticipate

33. 33 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Received Employer-Provided Educational Information on Retirement in Past Year In the past 12 months, has an employer or work-related retirement plan provider given you educational material or seminars about retirement planning and saving? Workers 2002 (n=775)

34. 34 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Forms of Information Provided by Employer Brochures Seminars or group meetings Newsletters/magazines Workbooks/worksheets Videos or CD-ROMs Computer software Individual access to a financial planner Intranet, Internet, or on-line services Retirement benefit statements Thinking about the educational material or seminars you received in the past 12 months, in which of the following forms did you receive the information? Workers receiving information on retirement planning from an employer 2002 (n=320) 200220012000 NA

35. 35 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Educational Material Led To Change in Behavior Did you make any changes in your retirement planning as a result of the material you received from your employer? If yes, what changes did you make? Workers receiving educational material or seminars (n=320) (n=86) (multiple responses accepted) Started saving more Changed allocation of money Researched other savings methods Started working more Other Started saving less Started saving again after having stopped Started saving for the first time

36. 36 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Employer-Provided Access to Investment Advice for Retirement Purposes In the past 12 months, has an employer provided you with access to investment advice for retirement purposes, that is, specific recommendations about which stocks, bonds and mutual funds you should invest your money in for retirement? If yes, did you request specific recommendations on how you should invest your money? Workers (n=775) (n=111) ProvidedRequested

37. 37 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute When thinking about your financial needs in retirement, how much thought have you given to... ? Retirees (n=225) Amount of Thought Given to Retirement Financial Needs The need for health insurance for you (and your spouse) The possibility of having to pay for health care expenses not covered by Medicare How to manage your money in retirement so you do not outlive your savings The need for long-term care insurance

38. 38 Retirement Confidence

39. 39 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Worker Confidence in Having Enough Money to Live Comfortably Throughout Retirement Overall, how confident are you that you (and your spouse) will have enough money to live comfortably throughout your retirement years? Workers 2002 (n=775) VeryNot at allSomewhatNot tooDon’t know/Refused

40. 40 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Next, I would like to know how confident you (and your spouse) are about certain aspects related to retirement. Workers 2002 (n=775) Worker Confidence in Specific Retirement Attributes You will have enough money to take care of your basic expenses during your retirement. You will have enough money to pay for long-term care, should you need it during retirement. You are doing a good job of preparing financially for your retirement. You will have enough money to take care of your medical expenses during your retirement. You will do a good job of managing your money in retirement so that you will not outlive your savings.

41. 41 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Overall, how confident are you that you (and your spouse) will have enough money to live comfortably throughout your retirement years? Retirees 2002 (n=225) Retiree Confidence in Having Enough Money to Live Comfortably Throughout Retirement VeryNot at allSomewhatNot tooDon’t know/Refused

42. 42 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Next, I would like to know how confident you (and your spouse) are about certain aspects related to retirement. Retirees (n=225) Retiree Confidence in Specific Retirement Attributes You will have enough money to take care of your basic expenses during your retirement. You are doing a good job of managing your money in retirement so that you do not outlive your savings. You will have enough money to pay for long-term care, should you need it during retirement. You did a good job of preparing financially for your retirement. You will have enough money to take care of your medical expenses during your retirement.

43. 43 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute How confident are you that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today? Workers 2002 (n=775) VeryNot at allSomewhatNot tooDon’t know/Refused Worker Confidence that Social Security Will Continue to Provide Benefits of at Least Equal Value

44. 44 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute How confident are you that the Social Security system will continue to provide benefits of at least equal value to the benefits received by retirees today? Retirees 2002 (n=225) VeryNot at allSomewhatNot tooDon’t know/Refused Retiree Confidence that Social Security Will Continue to Provide Benefits of at Least Equal Value

45. 45 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute How confident are you that the Medicare system will continue to provide benefits of at least equal value to the benefits received by retirees today? Workers 2002 (n=775) VeryNot at allSomewhatNot tooDon’t know/Refused Worker Confidence that Medicare Will Continue to Provide Benefits of at Least Equal Value

46. 46 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute How confident are you that the Medicare system will continue to provide benefits of at least equal value to the benefits received by retirees today? Retirees 2002 (n=225) VeryNot at allSomewhatNot tooDon’t know/Refused Retiree Confidence that Medicare Will Continue to Provide Benefits of at Least Equal Value

47. 47 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Mobility of the Workforce Explains Why Workers Value Defined Contribution Plans

48. 48 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Mobility is a fact of life at all ages. Source: U.S. Bureau of Labor Statistics

49. 49 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Very Few Workers Remain for the “Gold Watch”

50. 50 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute The Survey Indicates Knowledge that Could Lead to More Savings

51. 51 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute A Better Understanding of Life Expectancy The GAM 88 table says a man has average life expectancy of 80 – a woman 85 – yet 50% will live longer! Individuals don’t remember that this is an “average.”

52. 52 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute A Better Understanding of How Long We Will Need to Work to Match The Financial Security of Those Already Retired

53. 53 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute A Better Understanding of the Savings Needed for Retiree Medical Age of Last Life7% Health Inflation14% Health Inflation 80$94,000$160,000 85$126,000$261,000 90$160,000$408,000 100$226,000$852,000

54. 54 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute The Fact That Social Security Doesn’t Work Alone – Was Not Intended To Do So – and When I Can Get Full Benefits Source: Social Security Administration (SSA) Office of Research, Evaluation and Statistics, Fast Facts and Figures about Social Security, 1999, p. 1.

55. 55 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Median Replacement Rates from Social Security at Age 65 for Participants Turning 65 in the Year Indicated, by Income Quartile at Age 65 That SSA Replacement Rates Are Going Down

56. 56 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Equity Market Investment Returns Effect on 401(k) Accumulations at Age 65 Among Participants Reaching Age 65 Between 2030 and 2039, by Income Quartile at Age 65 (percent change) That My Age Makes a Big Difference in What I Can Do

57. 57 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Summary: What Is Needed Financial Education and Advice as Early as Possible Saving Early in Life Saving for Health Expenses as Part of Retirement Savings Assessment of the Prospects of Living a Long Time Planning Retirement Ages Accordingly Teaching and Planning on the Distribution Phase

58. 58 Source: 2002 Retirement Confidence Survey Copyright 2002 Employee Benefit Research Institute Visit EBRI Online for More www.EBRI.org www.choosetosave.org www.ourhealthbenefits.org www.asec.org

59. 59 EBRI 2121 K Street NW Suite 600 Washington, DC 20037 Voice: 202-659-0670 Fax: 202-775-6312