Many organizations nationwide portray a bleak retirement outlook for employees, says Aon Consulting…Study shows employers in the Central and Southeast believe their workers are least prepared to retire

CHICAGO, March 27 /PRNewswire-FirstCall/ -- Those looking to retire at a reasonable age may have to wait a little longer, according to a recently released study by Aon Consulting, a leading global human capital consulting firm.

Aon Consulting surveyed 1,071 U.S. employers and found that 39 percent believe half or more of their workforce will not have enough savings to retire between the ages of 62 and 65. Companies in the Central and Southeast are less optimistic, with 43 percent and 41 percent, respectively, saying the majority of their employees will not retire at a reasonable age, based on savings habits (see chart that accompanies this release for national and regional breakouts).

"Employees face a broad array of retirement plans offered by their employer, with different availability based on job type and when an employee was hired," said Chris Bone, executive vice president with Aon Consulting. "Today more than ever, employees control their retirement future, a responsibility that can't be taken lightly. Increasing life expectancies, multiple job changes and greater diversity of family resources in retirement, make it critical that workers start saving earlier and take full advantage of employer-provided retirement resources."

In addition, this study shows that 74 percent of organizations with 401(k), 403(b) and 457 plans say half or more of their employees contribute to these plans. However, only 19 percent of these companies believe their workers truly understand how to invest in plan assets. Meanwhile, 63 percent say their workforce has some understanding of defined contribution investment principles, but 18 percent of employers believe their workers have little or very little knowledge on the topic.

Despite having many employees facing retirement challenges, few companies are modifying their retirement plan designs, according to the Aon Consulting study. In fact, only 20 percent of companies are actively reviewing their retirement plans, while 80 percent are not considering near-term changes. Moreover, even though 76 percent of organizations believe retirement education is important, very important or absolutely critical, just 1 percent say financial or retirement planning information is communicated to employees on a regular basis.

"While most employees realize they should save more for retirement, the problem is they don't know how much more," said Bill Crawford, senior vice president with Aon Consulting. "Workers are left to interpret well-meaning, but nonspecific, retirement information, based on their own circumstances, which is a process that paralyzes many. Companies need to ensure this information answers the basic questions all employees ask, such as: How much do I need? How much will I have? Am I on track? If I am not on track, what can I do to change? Once equipped with this information, employees are prepared to start a financial plan."

Employer Contributions

This study also shows that 85 percent of organizations make contributions to employee 401(k), 403(b) and 457 plans to a certain level. In fact, 29 percent of companies offer a 100 percent match on employee contributions, while 7 percent provide a 75 percent match and 39 percent of employers match 50 percent of employee contributions. The level to which companies provide a match varies, based on employee contribution. More than 40 percent of organizations match employee contributions of 6 percent or more of pay, 16 percent match pay contributions between 5 percent and 6 percent, and 18 percent of companies match employee contributions between 4 percent and 5 percent of pay.

"Company matches can be significant, representing tens of thousands of dollars over time, so it's critical that employees understand their company's retirement plan design and know what's needed to take full advantage of the matching contribution," said Bone.

  Additional Data

  This study also reveals the following.

 

   -- The most popular retirement plans employers offer include 401(k)

      (63 percent), defined benefit (23 percent) and 403(b) (15 percent).

   -- Nearly 85 percent of organizations have 10 or more investment options

      in their defined contribution plans.

   -- More than 85 percent of companies allow for loans through their

      defined contribution plans.

   -- Nearly 90 percent of retirement plan participants use Web-based

      retirement planning tools.

   -- Fifty-eight percent of employers offer retirement plan participants

      personalized advisor-based retirement planning tools.

 

 

  About the Study

In January of 2006, Aon Consulting conducted its "National Employee Benefits Trends Survey" of more than 1,000 U.S. employers to examine 2006 employee benefit trends and determine what plan design decisions employers will make in 2007. The survey focused on health care, retirement, communication and HR outsourcing issues facing organizations of all sizes and industries. Copies of this study are available by calling 800-438-6487.

   About Aon

Aon Corporation (NYSE:AOC) ( http://www.aon.com/ ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

Aon Consulting is among the top global human resources consulting firms, with 2005 revenues of $1.255 billion and 7,000 professionals in 120 offices throughout the world. Aon Consulting delivers integrated consulting solutions to help clients with employee benefits, human resources outsourcing, compensation, communication and management consulting.

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