Americans Closest to Retirement Are Ill-Prepared to Generate a Retirem

Americans Closest to Retirement Are Ill-Prepared to Generate a Retirement ``Paycheck''

    Business Editors/Financial Editors

    NEWARK, N.J.--(BUSINESS WIRE)--Feb. 23, 2005--

Prudential Study Finds Guaranteed Retirement Income Desirable, but Elusive, for Many Near-Retirees
    A new study released today by Prudential Retirement finds Americans aged 55-64 overwhelmingly agree that having a guaranteed stream of income during retirement is their top goal, but the vast majority do not know how to convert their retirement savings into a regular retirement "paycheck," focusing instead on simply saving as much as they can. Prudential Retirement is a business of Prudential Financial, Inc. (NYSE: PRU).
    According to Prudential Retirement's fourth annual Workplace Report on Retirement Planning, despite a nearly unanimous desire for a guaranteed retirement income - as traditional pension plans provide - few older American workers are aware of or plan to use financial options that provide the steady paycheck they say they want. The study confirms that older workers are actively saving for retirement, but few are aware of the income distribution options currently available. In short, this latest Prudential report highlights that near-retirees simply do not know what to do with their retirement nest eggs once they stop working.
    According to the survey, some 83 percent of near-retirees (which included the oldest cohort of Baby Boomers) believe it is "very important" to generate an income that provides a comfortable retirement lifestyle. But barely 20 percent say they are well informed on how to do so. When asked if they would choose an income annuity to create a retirement paycheck (the only option available to guarantee a stream of income that one cannot outlive), fewer than half (44 percent) had even heard of the income annuity option, and just nine percent said they would use it.
    Moreover, only 15 percent of those surveyed are focused on "generating retirement income," while the remaining 85 percent are continuing to concentrate on "building their retirement nest egg" (approximately 41 percent); "preserving and protecting their savings" (approximately 23 percent); or "achieving better returns" (approximately 20 percent).
    "Current industry data shows that American workers aren't saving enough in their workplace-provided retirement programs, and our survey indicates that this lack of preparedness extends from the accumulation phase of retirement planning into the distribution phase," said John Kim, president, Prudential Retirement. "Even those who are conscientious savers and investors, including Baby Boomers now aged 55-58, aren't prepared to convert their retirement savings into a predictable retirement paycheck that they can't outlive."
    "We believe our survey should be a 'wake-up call' to employers, to retirement-plan providers and to the nation as a whole that those nearing retirement need help in managing the payout phase of retirement, especially in light of current discussions on Social Security," he added.
    "Our survey also underscores the need for better education -- targeted specifically to the needs of older workers -- on distribution options and strategies that deliver a predictable, guaranteed income in the increasingly do-it-yourself world of retirement planning. We need to work together to ensure that American workers have access to the tools and resources they need to build a more-secure retirement," Kim added.

    An Unanswered Call for Help

    This year's survey also points to an unmet need among many Americans for assistance with retirement planning. Although near-retirees acknowledged they must take personal responsibility for their retirement security, a mere seven percent have formal plans in place to help them manage such issues as generating income, identifying expenses, and utilizing savings.
    In addition, more the one-third (34 percent) say they need assistance to understand products and concepts -- such as income annuities and systematic withdrawal strategies -- that can help generate the predictable retirement income they seek. And a large percentage (35 percent) have yet to calculate the savings they need for a comfortable retirement or what their projected monthly living expenses might be in retirement (36 percent).
    Even more disturbing, when asked to give themselves a grade on their retirement preparedness, 53 percent awarded themselves a "C" or lower, casting grave doubt on the ability of older workers to "graduate" to a secure retirement.

    Other Notable Findings

    With retirement imminent, few near-retirees can estimate how much income they need to generate in retirement.

    -- The majority (90 percent) of near-retirees are either guessing
    how much income they would have or, even worse, simply do not
    have any idea of how much income they will be able to generate
    for themselves during retirement.

    Near-retirees need to shift their focus from "accumulation" to "distribution."

    -- Although retirement for many Americans is imminent, more than
    six in ten near-retirees still focus on accumulating assets or
    achieving better returns instead of planning on how to
    generate a steady stream of retirement income.

    The fear of outliving savings prevents many near-retirees from fully utilizing their financial resources to generate retirement income.

--	Too often, near-retirees simply "do the best I can" with retirement planning, instead of focusing on specific, retirement-critical goals such as a targeted level of income.
--	Nine in 10 near-retirees agree it is "very important" not to run out of money in retirement. This concern, however, may lead to "hoarding." Just 22 percent say they would tap into their savings for income early on in retirement, while most would try to hold on to their assets for as long as they could.

    Prudential Financial's fourth annual Workplace Report on Retirement Planning study on retirement issues among near-retirees polled 1,023 Americans employed full-time aged 55-64 about their retirement knowledge, goals, actions, and plans. The online survey was administered between October and November, 2004. The margin of error is plus 2.9 percentage points at the 95 percent confidence level. For a copy of the report, visit www.prudential.com.
    Prudential Retirement delivers retirement plan solutions for public, private, and non-profit organizations. Services include state-of-the-art recordkeeping, administration, investment management, comprehensive employee investment education and communications, and trustee services. With over 80 years of retirement experience, Prudential Retirement meets the needs of two million defined contribution participants and more than one million defined benefit annuitants. Prudential Retirement has $130 billion in retirement account values as of December 31, 2004.
    Prudential Financial companies, with approximately $500 billion in total assets under management as of December 31, 2004, serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the United States. These companies offer a variety of products and services, including life insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises and relocation services. For more information, visit www.prudential.com.
    Prudential Retirement is a Prudential Financial, Inc. business. Securities products and services are offered by Prudential Investment Management Services LLC (PIMS), a Prudential Financial company.

--30--SS/ny*

CONTACT: Prudential Financial Darrell Oliver, 973-802-9627

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: BANKING CONSUMER/HOUSEHOLD PRODUCT SOURCE: Prudential Financial, Inc.

Copyright Business Wire 2005