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Retirement Prospects for Unemployed Americans

Los Angeles, August 7, 2013

A study by nonprofit Transamerica Center for Retirement Studies® has found that 62 percent of displaced workers in the US are “not too” or “not at all” confident about their retirement prospects.

"Amid signs of economic recovery and an improving unemployment rate, millions of Americans are still unemployed or underemployed," said Catherine Collinson, president of the Transamerica Center for Retirement Studies® (TCRS).

Retirement Benefits Take a Back Seat

"Many displaced workers have raided their retirement accounts to make ends meet, and many may be overlooking the importance of retirement benefits as they seek meaningful employment. It's critical that we raise awareness of the issues and identify opportunities to help them rebuild their long-term financial futures."

Fifty-nine percent of displaced workers report having a retirement savings account of some kind. Despite a widespread familiarity of the taxes and potential penalties that may apply, their financial predicament is such that more than one-third (36 percent) of displaced workers who have retirement accounts have taken a withdrawal from those accounts.

Increased Retirement-Account Withdrawals

"The passage of time out of work, especially the one-year mark, can have a detrimental effect on retirement accounts," said Collinson. "Forty-two percent of those displaced for a year or more took a withdrawal compared to only 23 percent of those displaced for less than a year."

Of those who participated in a 401(k) plan at their most recent employer where they were fully employed, 43 percent indicate they have taken a withdrawal from their accounts, including 53 percent of the unemployed and 38 percent of the underemployed.

Among all displaced workers, the estimated median household savings in retirement accounts is approximately $7,500. The estimated median savings by age range follows:

Retirement Savings in the US

Displaced workers in their forties, the age range that reports the lowest level of household retirement savings, had the highest level of retirement account withdrawal activity at 55 percent, which helps explain the savings differential.

Those with College Education Fair Better

"A college education can open employment doors and offer higher pay – and lead to substantially more retirement savings," said Collinson. "Displaced workers with a college degree have saved an estimated median of $60,300, versus those with a high school diploma or some college who have saved $3,300."

The underemployed report higher levels of retirement savings at an estimated median of $8,600 compared to the unemployed at $6,500. The study also found that the underemployed are faring better than the
unemployed in terms of income, health care benefits, and general outlook.

The Risk of Overlooking the Importance of Retirement Benefits

"Many displaced workers may be overlooking the importance of retirement benefits when seeking employment opportunities, which could put them at a greater disadvantage in terms of rebuilding their retirement savings," said Collinson.

Only 17 percent of displaced workers cite generous retirement benefits as one of their top three most important characteristics of a future employer. The majority (56 percent) say competitive pay, followed by company stability (33 percent) and a convenient commute (31 percent) are most important to them.

Higher Pay Preferred Over Retirement Benefits

Fifty-five percent of respondents prefer a job with higher pay but poor retirement benefits. In making this trade-off, they are placing a higher priority on immediate financial goals but may be overlooking retirement benefits, which can be a meaningful part of their compensation package to build a more secure long-term financial future.

For recommendations for individuals, employers, the retirement industry, and policymakers, read the full article here >

For further information read the detailed survey results here >


About Transamerica Center for Retirement Studies®
The Transamerica Center for Retirement Studies® (TCRS) is a division of Transamerica Institute TM (The Institute), a nonprofit, private foundation. The Institute is funded by contributions from Transamerica Life Insurance Company and its affiliates and may receive funds from unaffiliated third parties. For more information about TCRS, please refer to www.transamericacenter.org.

Written by: TCRS