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Price of retirement security

By Jennie L. Phipps ·
Monday, February 27, 2012
Posted: 2 pm ET

Every time I write about annuities or other retirement planning tools that require people to turn over a chunk of their retirement savings in exchange for guaranteed income, a substantial number of readers respond vociferously, writing me things like, "Heck, no. Don't even talk about it. We're not interested."

So given that, I was surprised by the results of professional services firm Towers Watson's survey released today, indicating that nearly half of employees are willing to trade pay for retirement security.

The survey found:

  • Fifty-five percent of workers are willing to pay a higher amount from each paycheck to ensure they have a guaranteed retirement, compared to 46 percent who said the same thing two years ago.
  • Fifty percent of workers are willing to trade a portion of their pay to ensure they have access to health care benefits if they retire before they are eligible for Medicare benefits, versus 40 percent in 2009.
  • Fifty-three percent of workers are willing to trade a greater proportion of pay for more generous benefits overall.

It wasn't just older workers or those who lost big chunks of their 401(k)s during the Great Recession. Among those younger than 40 with defined benefit plans, 66 percent would pay for a guaranteed retirement benefit.

What's driving this? Put simply, fear.

  • The prospect of rising health care costs motivated 64 percent of workers to say they were willing to pay more for retirement security.
  • More than 56 percent cited concerns over the future of Social Security and Medicare.
  • Women, those with lower incomes and those with health issues were much more willing to relinquish control over their retirement investments in exchange for more stability in their retirement benefits over the long term.

Given this level of concern, it's hard to understand why the candidates for U.S. presidency aren't talking about ways to make retirement more secure, instead of focusing on cuts.

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1 Comment
February 27, 2012 at 3:23 pm

I really don't understand these survey responses. You're taking a risk no matter where you put your money. If you buy an annuity, you're taking a risk that the insurance company will be solvent for X years while you draw benefits. If you take Social Security into consideration when planning your retirement, you're taking a risk that your benefit level will not vary greatly. There are examples all over the nation of people who trusted others who were supposed to be handling things on their behalf (Madoff, Enron, airlines, municipalities, etc.)... and then the company or individual or local government goes bankrupt, and the nest eggs they're supposed to be incubating are consumed by the creditors. These investments were supposed to be extremely safe.

People need to realize that risk is everywhere, and that when it comes to retirement planning, there is no freaking Santa Claus. There's no benevolent bearded old white guy who will, if you believe in him and are "good" (read: save diligently), will dispense sugarplums at regular intervals upon retirement without your having to do anything material to generate or receive them.

When handing your money over to some other entity for extended periods of time, you're basically saying, "I trust YOU to take better care of my money than I would." For what entity could that ever possibly be true?