University Times

With the economy still reeling from the 2008 recession, are university employees nationally delaying retirement or taking other steps as a result?

That was the central question posed by TIAA-CREF researchers in a retirement confidence survey completed in June that measured perceptions related to retirement savings. The survey compared employees in higher education to all other employees in the United States.

In general, the survey showed significantly higher confidence levels in their retirement plans among university employees than for those outside the higher education sector.

That conclusion holds true at Pitt, said Ron Frisch, associate vice chancellor for Human Resources. In a nutshell, Frisch said, “The reality is that Pitt folks are typically more informed and diligent in their retirement planning than other groups, especially as compared to counterparts in U.S. non-higher education sectors.”

To illustrate the point, Frisch said that 85-90 percent of Pitt employees are enrolled in either TIAA-CREF or Vanguard defined contribution retirement plans offered here, with the other 10-15 percent in the defined benefit program, which puts Pitt above the national average in the higher education sector of those enrolled in plans offered by their home institution.

“Nationally, 90 percent of higher ed employees are currently saving, compared to 60 percent of U.S. workers,” Frisch said. In addition, 61 percent of higher education employees have tried to determine how much they need to save for a comfortable retirement, compared to 46 percent of U.S. workers, he said.

A long-time member of TIAA-CREF’s advisory board for its research wing, Frisch spoke in New Orleans last month at the College and University Professional Association for Human Resources (CUPA-HR) annual conference. He, along with Paul Yakoboski, principal research fellow of the TIAA-CREF Institute, reported on the retirement savings survey results, particularly as they apply to the higher education community.

While the TIAA-CREF Institute conducted the survey, data were garnered from across the higher education sector, not just from TIAA-CREF participants, Frisch noted.

Survey results were broken down into four levels of confidence: very confident; somewhat confident; not too confident, and not at all confident.

In response to the survey question on overall retirement confidence — “How confident are you that you will have enough money to live comfortably throughout retirement?” — the results were as follows:

• For higher education employees: 26 percent were very confident; 54 percent, somewhat confident; 12 percent, not too confident, and 5 percent, not at all confident.

• For all U.S. workers, 16 percent were very confident; 38 percent, somewhat confident; 24 percent, not too confident, and 22 percent, not at all confident.

Frisch said that comparison meant the higher education community is markedly more confident than American workers in general, although partly that can be attributed to higher ed’s worker demographics, such as age (generally older), as well as higher education and income levels.

While 90 percent of higher education employees are saving, the confidence levels tell a somewhat different story, Frisch noted. In response to the question, “How confident are you that you are saving the right amount?” respondents reported as follows: 21 percent were very confident; 59 percent were somewhat confident; 15 percent were not too confident, and 4 percent were not at all confident.

“What that tells us is that there appears to be uninformed saving in that people do not have a good idea how much they need to accumulate,” Frisch said. “We see the ramifications in their confidence in the large percentage of ‘somewhat confident,’ that is, ‘I think I’m doing the right thing, but I’m not sure.’”

Frisch believes employees both have overestimated and underestimated their retirement nest eggs.

Confidence in the higher education community in the investment of retirement savings is at similar levels to confidence in saving the correct amount: 26 percent are very confident they are investing wisely and 59 percent are somewhat confident they are. “You would expect a higher figure in the very confident category, given that nearly half — 49 percent — said they had sought investment advice from a financial adviser within the past year,” Frisch said.

The disconnect, he said, is the confidence in the advice they were given. “That’s the missing link: 56 percent said they were very confident that the advice they received was independent and objective, and 41 percent said they were somewhat confident of that. Confidence in the independence and objectivity of the advice impacts ‘follow-through’ — 31 percent of those very confident regarding the advice generally followed all of it. By comparison, only 7 percent of those somewhat confident in the advice followed all of it,” Frisch said.

The most telling data on retirement confidence levels, he said, derived from the question breaking down confidence between having enough money in retirement to take care of basic expenses versus having enough to take care of medical expenses.

In the basic expenses category, for higher education employees, the percentages were as follows: 45 percent, very confident; 45 percent, somewhat confident; 5 percent, not too confident, and 4 percent, not at all confident.

In the medical expenses category, however, those percentages were: 23 percent, very confident; 52 percent, somewhat confident; 15 percent, not too confident, and 8 percent, not at all confident.

Confidence in covering basic expenses was much higher, Frisch said. That translates into concerns over retiree health insurance benefits, which are a very expensive proposition for higher education institutions and well could be driving skittish employees to delay retirement.

“We don’t worry about that at Pitt. We’re one of the anomalies out there, that we offer such a rich retiree health package. The majority of people we talked to in higher education did not have retiree health care as an offering,” Frisch said. (Details on Pitt’s retiree benefits are available at http://retiree.hr.pitt.edu/.)

“If you retire today at age 65 and assuming you live to a ripe old age of 83, which statistically, is the average age right now, the projection is without the health care insurance we offer, you’ll need about $250,000 to cover health care costs. That’s taking into account that as you get older you’ll have more health care needs, but it’s not taking into consideration long-term care or anything of that nature. That’s a pretty compelling statistic,” he said.

Frisch said the survey results were useful to him in his ongoing evaluation of Pitt’s retirement benefits.

“At Pitt we just have TIAA-CREF and Vanguard. These are two of the most efficient, well-managed companies around. Typically they are dedicated to the not-for-profit sector, unlike industry, which uses a 401K model,” Frisch said.

“While higher ed people, generally, are confident, I hear people all the time say, ‘I’ll never have enough money to retire.’

“Well, do you really know how much you have? Have you even looked at your TIAA-CREF statement? Have you talked to a financial adviser? Most have not done that,” he said. Appointments with financial counselors are available through Human Resources, TIAA-CREF and Vanguard, Frisch noted.

Much of the discussion at September’s CUPA-HR conference centered on concerns over uninformed employees, he said.

“We’re moving into electronic statements and, frankly, I have a problem with that.” Frisch said many people simply delete material they receive online, whereas they may save a home mailing until they’re ready to read it.

Online statements to retirement plan participants also can bypass spouses, who in many cases manage the household finances, he noted.

“We have a fair number of spouses who call us every day that we answer questions for. Assuming that paper copies will go away, those people will not have access to those statements. That’s a concern,” he added.

Another concern is the gender gap in information.

“We have historically seen a more conscientious group of women in financial planning. Why? I don’t know that, but my colleagues said the same thing. As we start planning for additional educational sessions to prepare people for retirement, we’d like to get more men involved,” Frisch said.

Benefits officials have realized for quite some time that earlier retirement planning, especially in a shaky economy, is required.

“We used to tell people to start planning at least by 60. Then we moved it to 55. Now we’re thinking we need to move that to 50 and start thinking about planning for that next 15 years, or how ever long it is you’re working,” Frisch said. The main message is: the earlier, the better, he said.

How does the institution facilitate that?

“What comes out in these statistics is that higher ed institutions do a much better job at teaching employees. But we’re not there yet. As informed as our folks are, we can never provide enough education. Those who want it, will come and get it. Unfortunately, many won’t. Many don’t realize they need to plan until it’s too late.”

He said that Pitt’s Benefits director John Kozar is working on a much broader series of programs to address employee awareness and understanding.

“We’re working with TIAA-CREF and Vanguard on that to develop these programs. They’re the experts, we should be using them. That came out of the CUPA conference,” Frisch said.

On the positive side, statistics show that Pitt employees are making phone or online inquiries for financial counseling at an increasing rate.

Calls to Vanguard, for example, increased by 27 percent between January 2008 and December 2009 and online requests for financial counseling at Vanguard increased 48 percent during that timeframe.

“What you can do calling the phone counseling centers in a matter of minutes is no different from what you can do face-to-face,” Frisch said.

“Those are TIAA-CREF and Vanguard staff who know the Pitt plans. That helps, because every plan is different. It really pays to get advice specific to the plans, because your plan design, which depends on your salary and the choices you make, is always going to be different. Even if you transfer to another institution it’s their plan design you’ll need to know,” Frisch said.

In addition, TIAA-CREF and Vanguard staff have no stake in getting participants to sign up for any particular plan. “They’re not earning a commission for anything. That way they can be objective and look out for your interests,” he said.

For those employees who are starting at square one in their retirement planning, he recommends a call to the Benefits office.

“Our folks can help direct you. There’s the unvested period, there’s the vested period. We’ll help you through that first step, get you set up, show you where to go online, explain your options,” he said. “We can’t make a fiscal decision for you. We can guide you, we can coach you and we can give you the names of the right people to talk to. But even TIAA-CREF and Vanguard can’t tell you what to do. They can give you performance ratios and tell you, ‘If you do this, here’s what the trend shows.’ They’re not allowed to say, ‘You’re out of your mind if you don’t enroll in this plan.’ You have your own fiduciary responsibility, which makes sense. It’s the way law is set up, too,” Frisch said.

“From our perspective, they’re partners. We provide what we consider to be some of the best opportunities for retirement investment that we could possibly find, in an efficient, low-cost manner. I’m a believer that if you’re not investing, you’re leaving money on the table. And the only person that you’re cheating is yourself.”

—Peter Hart