7th Annual Transamerica Retirement Survey The Debt Generation? Getting Echo Boomers On The Right Track to Retirement
7 th Annual Transamerica Retirement Survey About this Year s Survey Sample Characteristics Companies with 10 or more employees National telephone survey Samples randomly drawn from telephone CDs of national listed sample Employer Survey 603 Employers Conducted 7/28/05 to 8/17/05 Margin of error is +/- 4.1% Transamerica commissioned Zogby International to conduct survey For complete survey results, please refer to http://www.taretirement.com/thecenter. 2
Different Priorities The responses given by Echo Boomers provides insight into their current financial obligations and priorities versus other generational groups. It is evident that paying off debt is high on the list of priorities 4. If you had an extra $1000, what would you do with the money 40% 39.8% 35% 30% 25% 20% 23.9% 20.6% 21.2% 20.4% 28.0% 26.0% 31.5% 24.5% 22.6% 15% 10% 14.8% 11.4% 5% 0% Pay off Debt Spend it on Essentials Save it Spend it on Luxury Echo Boomers Gen X Baby Boomers 3
Echo Boomers: Household Income 40% 37% 35% 30% 25% 20% 21% 23% 15% 10% 5% 10% 5% 3% 0% <$25k $25k- $50k $50k- $75k $75k- $100k $100k- $150k $150k+ 4
Echo Boomer Participation & Contribution Rates 60% 50% 40% 30% 20% 10% 0% 6. Do you currently participate in your company's employee-funded retirement plan? 37.0% 2004 2005 59.9% 8% 6% 4% 2% 0% 7. What percentage of your salary are you saving for retirement through your company-sponsored plan this year? (Median) 7.0% 7.3% Average 2004 2005 5.0% Median 6.0% 7 Th Annual Transamerica Retirement Survey, 2005. 5
Starting Early 20. At what age did you first start saving for retirement? (Average) 40 30 21 25 32 20 10 0 Echo Boomers Gen X Baby Boomers 7 Th Annual Transamerica Retirement Survey, 2005. 6
Not enough money to go around? Other immediate financial obligations may be limiting Echo Boomers in their ability to participate & contribute to their employer s retirement plan 80% 6. Do you currently participate in your company's employee-funded retirement plan? 75.7% 78.0% 10% 7. What percentage of your salary are you saving for retirement through your company-sponsored plan this year? (Median) 10.0% 8.0% 75% 70% 65% 60% 55% 59.9% 8% 6% 4% 2% 6.0% 50% 0% Echo Boomers Gen X Baby Boomers Echo Boomers Gen X Baby Boomers 7
Current Life Events Postpone Saving for Retirement Echo Boomers have not lost complete sight of retirement since they are more likely than other generational groups to say they will participate in the future. However, current financial obligations and lack of communication may have delayed the funding of retirement savings for a significant percentage of Echo Boomers 13. Do you plan to participate in your company's retirement plan in the future? (Workers who do not currently participate) 75% 70% 65% 60% 55% 50% 45% 40% 73.9% 51.4% 43.9% Echo Boomers Gen X Baby Boomers 8
More Than Debt? At first glance it may appear that the differences with Echo Boomers may be due just to various financial obligations and other priorities. But upon further analysis, there also appears to be a gap in the understanding of what a retirement plan has to offer. Overall Echo Boomers Gen X Baby Boomers 23. Which job offer would you choose: the first offers excellent retirement benefits and meets your minimum salary requirements, while the second offer provides a higher salary, but poor retirement benefits Choose Benefits Choose Higher Salary 58.3% 35.5 37.0% 56.7 56.3% 38.9 65.0% 28.9 44. I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date Agree 22.6 33.8 21.4 18.6 405. How important is a 401(k) or other employee self-funded plan? Overall Very Important Somewhat Important 93.2 73.5 19.7 93.7 57.7 36.0 93.5 77.0 16.5 94.3 74.7 19.6 14. How important is it to you that the company you work for provides a matching contribution? Very Important 72.5 60.7 74.8 72.7 9
Lack of Communication Companies are less effective at communicating the benefits of a retirement plan to Echo Boomers than other generational groups Overall Echo Boomers Gen X Baby Boomers 16. My company gives me the right information I need to make decisions about the retirement plan Strongly Agree 55.1% 38.4% 59.0% 58.0% 17. I am satisfied with the retirement plan my company offers Strongly Agree 43.0 31.3 48.5 42.7 46. I would like to receive more information from my company on how to reach my retirement goals Overall Strongly Agree Somewhat Agree 49.7 22.9 26.8 62.6 20.9 41.7 52.1 21.1 31.0 41.4 24.2 17.2 10
How The Industry Can Help: 1. Grass Roots Efforts Get involved & stay involved! It s not too late to let your Congress know how important it is to pass the Pension Bill that s currently in conference. Echo Boomers will especially benefit from... Automatic enrollment, automatic deferral increases, default investment option Investment advice EGTRRA permanence including the Savers Credit 11
How The Industry Can Help: 2. Reaching Out Take a cue from the credit card companies... visit college students on campuses early and often Provide workshops that help high school and college students understand the importance of financial planning, controlling spending, and saving early Provide informational literature to career planning offices regarding the importance of a retirement savings plan when looking for a job (And support any new legislation that would get credit card companies OFF of college campuses and preapprovals OUT of mailboxes) 12
How The Can Industry Help: 3. More & Better Tools Broaden retirement savings educational & guidance offerings to encompass the overall financial plan Bundle on-line financial planning tools with retirement savings tools and calculators Provide access to fee-based financial planners Offer referrals to reputable banks, credit unions, and debt consolidation services Targeted communication campaigns Develop targeted communications campaigns and work with employers to reach out to the younger members of their workforce. Not only are they developing the next generation of employees, but also the next generation of savers How much does it REALLY cost Develop comparison list of consumer items (cell phones, I-pods, TVs, etc.) and how the purchase of these items may reduce potential retirement savings The importance of rolling over Teach Echo Boomers the benefits of rolling over vs. cashing out. Higher turnover rates make it more likely that early retirement savings are being lost through cash outs. 13
Transamerica Center for Retirement Studies About The Center The Transamerica Center for Retirement Studies ( The Center ) is a collaboration of experts assembled by Transamerica Retirement Services Promotes awareness of emerging issues and trends surrounding retirement security in the United States Research emphasizes employer sponsored retirement plans, small to mid-sized companies and their employees, and the implications of legislative and regulatory changes Conducts the Annual Transamerica Retirement Survey For more information about The Center and complete survey results, please refer to http://www.taretirement.com/thecenter. 14