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Anxiety Ratchets Up Retirement Planning

Worried about economic security in retirement, employees are increasingly willing to trade some of their pay for better and more secure retirement and health care benefits.

According to a survey of 9,200 workers consulting firm Towers Watson released on Monday, 44% are worried that their retirement benefits will be reduced over the next two years. Insecurity is particularly acute among younger workers with defined benefit pension plans–some 63% of whom fear looming cuts. When it comes to health care benefits, employees are even more concerned. Almost 75% worry their out-of-pocket costs will rise over the next two years. In contrast, in 2007, 67% expressed such a concern.

The Towers Watson survey found that 55% of respondents would be willing to pay more from each paycheck to ensure that they have guaranteed retirement benefits. That’s up from 46% two years ago. Half of the respondents would be willing to do the same for guaranteed access to health care benefits, should they need them before becoming eligible for Medicare. Again, that represents an increase–in this case from 40% in 2009. Moreover, 53% said they would be willing to trade a portion of their pay to secure more generous benefits.

Kevin Wagner, a senior retirement consultant at Towers Watson, attributes the trend to the economic crisis, which highlighted the volatility of stock market returns.

“Since the economic crisis, employees have been paying much closer attention to their retirement readiness, and many are willing to look at new ways to balance their mix of pay and benefits,” he said in a statement Towers Watson released Monday. Adding to that insecurity are declines in 401(k) account balances and home values. “As a result, retirement security has become significantly more important” to workers, he says.

Among the survey’s other findings:

•     64% of respondents singled out rising health care costs as a concern.

•     56% said they are concerned about Social Security benefits, Medicare benefits, and higher prices for necessities.

•     Older employees, women, lower-paid workers and those with health issues are most willing to give up control over their retirement investments in return for more stability in their retirement benefits over the long term.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.