Older workers more confident about retirement stash

Older workers are feeling more confident about their ability to retire comfortably, but younger workers, particularly those with defined-contribution plans, are growing increasingly worried.

A survey by consultant Towers Watson & Co., released this month, showed that half the workers 50 to 64 who were surveyed in May and June are very confident about having enough financial resources to live comfortably five years into retirement, up from 44% in March 2009.

A separate survey by The Charles Schwab Corp. found that 54% of workers 50 to 60 don’t expect to delay their retirement, while 38% said that they will retire later than originally planned. Eighty-eight percent of the respondents in the Schwab survey, which was released Aug. 31, said that they plan to continue working after becoming eligible for retirement, with 28% saying that they need more money and 25% citing a desire to remain mentally, physically or socially active.

Almost three-quarters (74%) of the respondents to the Schwab survey said that they won’t need financial support from others during their lifetime. Fifty-four percent of those same respondents said that they will enter retirement debt-free.

Tad Fryer, a vice president and branch manager with Schwab, said that the results confirm what he has heard anecdotally from clients.

“I think [clients are] very optimistic,” he said. “When people pick a retirement date … they don’t tend to let market volatility dissuade them from something that’s been a lifelong dream.”

The average savings rate of Schwab clients has increased to 6%, from 2% in 2007, Mr. Fryer said.

Similarly, workers in retirement plans administered by Massachusetts Mutual Life Insurance Co.’s retirement services division are showing increased confidence in their ability to retire, according to a report released by the company Aug. 31.

Ninety-six percent of workers in retirement plans administered by MassMutual maintained or increased their savings rate through the quarter ended June 30.

“We were pleasantly surprised by a couple of things,” E. Heather Smiley, chief marketing officer for the retirement division, wrote in an e-mail.

“First, I believe that MassMutual participants are holding steady because we have been aggressively communicating with them on the importance of saving consistently and adhering to a long-term investment strategy, and this message seems to be taking hold,” Ms. Smiley wrote. “Our second-quarter communications focused on increasing retirement savings and, in fact, among participants over age 50, those who did increase their savings rate did so by an average of 5.43% which I think is an excellent result.”

Although some workers appear to be regaining confidence in their ability to retire, younger workers and those with DC plans only are more skeptical, according to Towers Watson.

The percentage of workers 50 to 64 who are concerned about whether their employers will reduce benefits declined to 39%, from 44% last year, and those who are concerned about the elimination of benefits dropped to 30%, from 38%.

Younger workers — under 40 — were less confident. Sixty-eight percent said that they worry that benefits will be reduced, up from 61% last year, and those concerned about elimination of benefits increased to 59%, from 42%.

The Towers Watson survey also showed that 52% of older workers in defined-benefit plans are confident that they can live comfortably 25 years into retirement, compared with 34% of those with DC plans.

“We’re seeing now that the markets have come back, and people are feeling more comfortable, but interest rates are so low now that it’s difficult for people in DC programs to take that accumulated wealth and convert it into retirement income,” said Kevin Wagner, a senior retirement consultant at Towers Watson.

The general industry shift to DC plans from DB plans means that many employees will have to work longer, increasing the age of the work force, he said.

“Plan sponsors of DC-only retirement programs will likely see an older work force over time and, perhaps, be challenged in their need to bring in younger employees with new ideas and skill sets,” Mr. Wagner said.

The Schwab survey questioned older employees about advice to their younger counterparts. Fifty percent suggested that they “live within their means,” while 30% said to “begin to save at an early age.”

Timothy Inklebarger is a reporter at sister publication Pensions & Investments.