CONFERENCE CALL: WORKERS SEE NEED, BUT CAN THEY SAVE?

Despite the booming stock market of recent years, the long economic expansion and low inflation, most Americans do not believe they will have enough money to live comfortably in retirement. Worse yet, people who earn less than $40,000 annually may not be in a position to do much about it anyway.

Those were among the findings of two studies released at the National Summit on Retirement Savings in Washington this month.

“We have people’s attention. They’re now thinking about retirement,” says Paul Yakoboski, senior research associate for the Employee Benefit Research Institute. “But at this point in time that has yet to translate into action.”

He believes the reason most people lack confidence in their retirement future is that “Many are facing up to the reality of what’s before them and what they need to do. That’s probably a good thing, and it’s a first step to taking action.”

Delegates at the savers’ summit called for more tax incentives and regulatory simplification for both individuals and employers to set up retirement plans and savings plans. Treasury Secretary Robert Rubin told the gathering that any new tax incentives should be aimed at middle- and low-income people, not at well-off individuals. Otherwise, he said, savings would not increase, but rather just be diverted to tax-deferred accounts.

The annual retirement confidence survey by three Washington organizations — the research institute, the American Savings Education Council and Mathew Greenwald & Associates — found that the percentage of working Americans who are very confident that they will have enough money to live comfortably through their retirement years has remained fairly constant over the past six years –20% to 25% — despite the prosperity of the American economy during that period.

almost half are cognizant

But 45% of working Americans have now at least attempted to calculate how much they need to save by retirement. That figure is up sharply from only 36% last year.

Another survey released at the same time by Americans Discuss Social Security, a Washington-based non-partisan group that does not take a stand on how the retirement system should be changed, found that only 23% of working Americans are saving systematically for retirement. The chief barrier, the group found, is income: Few people with annual incomes below $40,000 are saving systematically for retirement, regardless of their age. Of respondents in that bracket, just 17% of those 50 and older and 11% of those under 50 are systematic savers, says the study.

“Having limited income is a barrier to saving, for Americans of all ages,” says Carolyn Lukensmeyer, executive director of the Social Security group.

The poor savings rate “demonstrates the importance of the earned-income tax credit,” which is only for very low-income workers, she adds.

The Employee Benefit Research Institute study focused on small businesses. More than 35 million Americans work for businesses that employ fewer than 100 people, and 25 million of them have no employer-sponsored retirement plan. The study focused on why. Fifty-one percent of small business owners it surveyed cite uncertain revenue as a major reason they do not have a plan, 35% say there are too many government regulations and 27% say too much paperwork is required.

Small business owners also perceive little demand from employees to offer a plan, Mr. Yakoboski says. Half of those responding say employees prefer higher wages and other benefits, such as health insurance, over a retirement plan, and many workers do not participate even if a plan is offered.

The groups say their findings should be considered in the development of tax and other public policies. Don Blandin, president of the American Savings Education Council, says there is a need to simplify retirement plans for small businesses and continue to educate workers on the need to save.

There also needs to be more discussion of how company pension plans should be changed, Ms. Lukensmeyer says, to help low-income people get into retirement plans.