Preparing For Retirement

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Overview

State and local pension systems have adopted significant reforms in recent years in an effort to become fiscally sustainable, and many policymakers are considering additional changes to public retirement benefits. The impact of these reforms on recruitment and retention of a talented workforce remains unclear, and there is a growing need to better understand workers’ thoughts and attitudes about retirement benefits. While many national surveys have looked at retirement issues, few have focused specifically on state and local workers. In order to address this need, The Pew Charitable Trusts, in collaboration with the Center for State and Local Government Excellence, conducted a nationwide survey of randomly selected state and local workers in late 2013. The survey aimed to improve understanding of how much state and local workers value their retirement benefits, how these benefits affect their workforce decisions, and how well these benefits are meeting workers’ retirement needs. Respondents were asked about their retirement confidence, preferences, and knowledge.

Pew released a summary of the top findings in 2014. This report takes a deeper look at the survey results. Following are key data points that are discussed in more detail later in the report.

Profile of state and local workers

• The sample included people in a wide range of professions, such as teachers, bus drivers, principals, professors, engineers, scientists, nurses, doctors, counselors, and social workers, to name just a few. More than half of the public employees surveyed said they had worked in the public sector for more than 10 years. Nineteen percent said they had worked for state or local government for less than five years.

Expected tenure

• Most state workers (74 percent) expected to stay with their current employer until retirement. That number was much higher for workers 50 or older, compared with workers under 50: 91 percent of older workers expected to stay with their current employer, compared with 64 percent of workers under 50. The average worker in the survey was 47 years old.
• Younger workers tend to be much more mobile. Only 39 percent of workers under 30 expected to work for their current employer until retirement, and 27 percent expected to work in a job outside of government.

Plan participation and knowledge

• Most workers (64 percent) said their employer offered a defined benefit plan. Seventy-five percent of workers 50 or older said their employer offered a defined benefit plan, compared with 44 percent of workers under 30.
• Twenty percent of workers said they did not know which type of retirement plan their employer provided. Thirty-six percent of workers under 30 said they did not know which plan was offered.
• Workers were more knowledgeable about participation in Social Security than in their employer’s retirement plan. Seventy-eight percent said they participated in Social Security, and just 1 percent said they didn’t know if they participated.

Retirement confidence

• Most workers (69 percent) were very or somewhat confident that they would have enough money to live comfortably in retirement.
• State and local public workers cited higher levels of confidence about retirement than the general population of workers did.
• Workers cited greater confidence in their retirement system than in Social Security. Eighty-two percent were very or somewhat confident that their employer’s retirement system would pay them their full benefits. Of workers who expected Social Security to provide at least some of their income in retirement, only 40 percent were very or somewhat confident that Social Security would pay their full benefits throughout retirement.
• Workers cited expected retirement ages that were similar to those in a recent survey of all workers.
• Fifty-nine percent of workers said they expected to need at least $50,000 annually to live comfortably in retirement.

Other work factors

• Fifty-five percent of workers rated job security, work-family balance, and health insurance as extremely important. Forty-five percent listed retirement and pension plans as extremely important. Only 37 percent listed total annual salary as extremely important.
• A 2009 survey asking a similar question of all workers found that respondents were least likely to list retirement and pension plans as extremely important compared with the rest of the factors.

Satisfaction with retirement benefits and salary

• Workers reported higher levels of satisfaction with their retirement benefits than with their salary. Eighty-five percent were very or somewhat satisfied with their retirement benefits, while only 72 percent said the same of their salary.
• Two-thirds of workers reported being very or somewhat satisfied with both their salary and their retirement benefits. Ten percent were not too or not at all satisfied with either.

Investment and risk preferences

• Sixty-nine percent said they wanted more control over where their retirement money was invested. Only 27 percent wanted their employer to manage their money.
• Just over half preferred moderate investment risk with moderate gains. Only 13 percent preferred high risk in exchange for potentially high gains.
• More younger workers cited a preference for higher investment risk tolerance for retirement benefits compared to older workers; 27 percent of workers under 30 said they wanted high risk compared to 6 percent of workers age fifty and older.

Effect of plan design on retirement decisions

• Eighty percent of respondents thought many government workers stay in their jobs until they reach retirement so they won’t lose retirement benefits, even if they’d rather leave those jobs at a younger age. Sixty percent said this happens a lot.
• Just over half reported that some workers retire earlier than they’d like in order to maximize retirement benefits. Thirty-one percent said it happens a lot.

Retirement preferences

• Forty-seven percent said they would prefer their retirement benefits as a series of guaranteed payments. Thirty-seven percent wanted a partial lump sum and the rest as a series of payments. Fifteen percent wanted one lump sum.
• Fifty-five percent of workers preferred more generous retirement benefits in exchange for a somewhat lower salary. This was reversed for workers under 30, with 53 percent of them saying they prefer a higher salary in exchange for a somewhat smaller retirement benefit.

Overall assessment

Sixty-one percent wanted to keep their retirement plan as is. Twenty-two percent said it needed minor changes, and 12 percent said it needed major changes.

Download the full issue brief.