Ameriprise Retirement Services released results from a 2005 National Survey

Ameriprise Retirement Services (formerly American Express Retirement Services) today released results from a 2005 National Survey on Financial Stress and Individual Plan Health comparing the current findings with results from the same survey conducted in 2004 and 2002.

Conducted in conjunction with Synovate and Ameriprise Financialís Global Marketplace Insights, results from the 2005 survey revealed that a majority (53 percent) of working Americans, who are employed with a company that offers a retirement plan, indicated they were experiencing moderate to high levels of financial stress, down from highs of 60 percent in 2004 and 61 percent in 2002.

As in 2004, the most frequently cited source of stress in the 2005 survey was saving enough for retirement (39 percent). Also cited was affording healthcare in retirement (31 percent), which was up slightly from 2004. In addition, high on the list were 37 percent stressed by dealing with debt, 32 percent affording a big ticket item and 30 percent stressed by paying their regular budget or bills.

ìA stronger economy since 2002 has certainly contributed to some moderation of stress. However stress still remains a very significant factor as people contend with an increasing array consumer-based benefits decisions,î said Rusty Field, vice president ñ Ameriprise Financial Education and Planning Services. ìOver the course of all three of these studies the results consistently show that people are most concerned about their financial future in retirement.î

Stress about retirement savings continues to prompt many workers to look for more assistance with both their retirement plan saving, and their overall financial situation. There was a dramatic increase from 2004 in the number of workers indicating some need for assistance in deciding how to allocate their plan assets. More than 2 out of 3 (65 percent) workers are looking for help, versus just more than half of all workers in 2004 and 2002.

ìThere may be a growing recognition that, after moving from a bull market, through a severe bear market and to a market on the fence, people are more frustrated than ever with the results of managing their own retirement plan investment choices. The losses of three and four years ago are not as easy to erase as some may have thought,î said Field. ìThere remains a clear need for investment advice, and even more of a need for investment products that provide a hands-off solutionósuch as, managed accounts, time horizon and targeted-maturity options.î

Given the findings of stress over retirement saving and the desire for assistance with investing, the survey turned its attention to gauging the status of each individualís retirement plan account. Ameriprise Retirement Services uses a Plan Health Index for corporate retirement plans which measures plan health and overall plan success for employers (part of its patent-pending BluePrint DesignSM process). The Index is derived from metrics of plan participation, a strong deferral rate of at least 6 percent of salary, and a diversification threshold of at least three investment optionsóor the use of a lifestyle, life-cycle, or targeted maturity fund option in lieu of at least thee investment options.

In applying the Index to the respondents, the survey found that less than 1 in 3 (31 percent) of those who are participating in or eligible for a company-sponsored 401(k) plan would be considered to have healthy retirement plans. Poor plan health also was found to contribute to stress level. Persons without a healthy retirement plan are more than two times more likely than those with a healthy plan to have experienced high or extremely high financial stress over the past 18-24 months.

ìAchieving a healthy plan account begins with determining your retirement income needs and setting a savings goal,î said Field. ìYet, if anything dubiously contributes to a lower measure of financial stress, it could be peoplesí beliefs about replacement income needs in retirement.î

The 2005 study found, on average, people believed that their income needs in retirement will be 62 percent of their earnings before retirement (versus a widely recognized and recommended level of 70 to 80 percent).

Beyond the overall average, however, significant percentages believe they can get by on far less: 44 percent believe they can live on just 50 percent of their pre-retirement earnings or less 17 percent believe that 30 percent or less of their pre-retirement earnings will be sufficient.

ìUnfortunately, financial stress levels would likely be much higher if people were shown a more accurate illustration of their replacement income needs,î said Field.

The idea of adding automated features to retirement plans had appeal with 59 percent stating that they were very or somewhat interested in an automatic program to diversify their retirement plan investments. Coupled with 65 percent of workers indicating an overall need for assistance in deciding how to allocate their plan investments, this shows there is strong demand for investment products and services that make the management of retirement plan portfolios easier for people to deal with. A slight majority of respondents also felt automatic diversification would have a beneficial effect on their level of financial stress, with 42 percent stating it would help a little, and 14 percent stating it would help a lot. In addition, workers with a healthy plan are more likely to be very interested in automated investment diversification features of the plan than are workers with unhealthy plans.

ìFor all that it has added on the positive side for retirement saving and investing, the defined contribution system also has required people to become professional investment managers of a sort, choosing among several mutual fund options, creating a diversified portfolio, and keeping it in balance over time. Is it really necessary that we cause people so much stress when it comes to handling their investment choices? We need to make things much, much easier,î said Field.

Distributed by HR Marketer.com