Results of the 2007 Retirement Confidence Survey for

Results of the 2007 Retirement Confidence Survey for the Spring 2007 Partners Meeting American Savings Education Council (ASEC) April 18, 2007 The Issue Brief and Fact Sheets for the 2007 RCS may be downloaded at www. ebri. org Employee Benefit Research Institute 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

2007 RCS Methodology • 17 th annual measure of worker and retiree confidence about retirement • 1, 252 21 -minute phone interviews conducted in January 2007 through random-digit dialing • Interviewed Americans ages 25 and over • Two questionnaire versions - 1, 000 interviews with workers (not retired) - 252 interviews with retirees

More than 1 in 4 workers are very, more than 2 in 5 are somewhat confident about having enough money for retirement. Overall, how confident are you that you (and your spouse) will have enough money to live comfortably throughout your retirement years? (2007 Workers n=1, 001) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 1993 -2007 Retirement Confidence Surveys 2

Just 4 of 10 workers have tried to calculate how much money they will need to save for retirement. Have you (or 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? (2007 Workers n=1, 001) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 1994 -2007 Retirement Confidence Surveys 3

The majority think they need low amounts to live comfortably. How much did you (or your spouse) calculate you would need to accumulate in total by the time you retire? If haven’t calculated: How much do you think you (and your spouse) will need to accumulate by the time you retire so that you can live comfortably in retirement? (Workers n=1, 001) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 4

But total savings are modest. In total, about how much money would you say you (and your spouse) currently have in savings and investments, not including the value of your primary residence? Please include savings, certificates of deposits, stocks, bonds, mutual funds, employer-sponsored retirement savings plans, and other investments, but do not include the value of defined benefit plans. (Workers n=1, 001; Retirees n=251) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 5

BABYBOOMERS ONLY: HOW MUCH DO YOU THINK YOU (AND YOUR SPOUSE) WILL NEED TO ACCUMULATE IN TOTAL BY THE TIME YOU RETIRE SO THAT YOU CAN LIVE COMFORTABLY IN RETIREMENT (expressed as a multiple of current earnings) Ballpark E$timate®-Monte Carlo simulations: • Target multiples for 75 percent chance of adequacy, retirement age = 65 – – • Median = 6. 5 Target multiples for 90 percent chance of adequacy, retirement age = 65 – – • High income male = 7. 1 High income female = 10. 1 Low income male = 22. 9 Low income female = 34. 2 High income male = 11. 9 High income female = 13. 9 Low income male = 42. 0 Low income female = 54. 2 Reasons why this is a conservative value of the underestimation of resources needed Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 6

Nearly 2 in 5 retirees left the workforce before they planned. Did you retire earlier than you planned, later than you planned, or about when you planned? (2007 Retirees n=251) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 1991 -2007 Retirement Confidence Surveys 7

People often retire early due to reasons they can’t control. Did you retire earlier than you planned because…? (Retirees n=89) You could afford to retire earlier than planned There were changes at your company, such as downsizing or closure You had a health problem or disability You wanted to do something else You had to care for a spouse or another family member You had another work-related reason Your skills were obsolete Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 8

Does perceived longevity modify baby boomer’s demand for annuity products? • Insurance products (such as annuities) are more cost effective when the maximum possible loss exceeds the expected cost by a wide margin – Would expect that the perceived probability of living to “life expectancy” would not have a great deal of influence on the demand for annuities – However, the perception of living to a much older age should be an important determinant • When baby boomers were asked if they thought it was likely that they would live until at least age 85: – 22. 4 percent of those who did not were likely to buy an annuity as opposed to 25. 9 percent of those who did • When baby boomers were asked if they thought it was likely that they would live until at least age 95: – 22. 3 percent of those who did not were likely to buy an annuity as opposed to 32. 0 percent of those who did Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 9

About half of workers think that less than $250, 000 will be adequate to cover their health care costs during retirement. How much money, if any, do you think you (and your spouse) will need to accumulate by the time you retire just to cover the cost of health care, nursing care, prescription drugs, and health insurance in retirement? (Workers n=1, 001) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 10

Nearly half of all workers feel less confident as a result of changes in recent years to the employer pension system. Over the past few years, a number of changes have been made to the employer pension system. How, if at all, have these changes affected your confidence about the amount of retirement money you (and your spouse) can expect to receive from an employer-provided traditional pension plan? Compared with five years ago, are you now… (Workers n=1, 001) Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 11

Almost 1 in 5 has personally experienced a decrease in retirement benefits. The most common response was to take no action. Has the level of retirement benefits offered by your (or your spouse’s) current employer decreased in the past two years? If yes, what, if anything, have you (or your spouse) done as a result of these changes? (Workers employed or with employed spouse n=851) Benefits Decreased? Actions Taken Saving more on own 24% Trying to stay healthier 12% Saving more in employer’s plan Planning on working in retirement 5% Making greater use of financial planning or investment information 5% Planning to postpone retirement 4% Seeking advice from a financial professional 4% Looking for employer with better benefits 2% Other (n=143) 8% 8% Nothing Don’t know/Refused Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey 38% 1% 12

Of workers who contribute to their employer’s plan, 7 in 10 would be willing to automatically increase their contribution at each raise. Suppose your employer automatically increased the percentage of your salary contributed to the plan by 1% each time you received a raise. You could choose to discontinue the automatic increase at any time. At about what percentage of your salary do you think you would discontinue the automatic increase? (Workers currently contributing to employer-offered retirement savings plan n=456) Less than 5% 5% to 9% 10% to 14% 15% or more Immediately/ Depends on Before first circumstances raise /finances Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. , 2007 Retirement Confidence Survey Don’t know/ Refused 13