Study: Older faculty members feel financially ready for retirement, but don't have detailed plans
While older faculty say they’re financially prepared for retirement, few have planned for it in detail, according to data released today by Fidelity Investments. Younger faculty are less confident about retirement and less prepared for it financially, and greatly value employer-sponsored health care benefits.
Both trends could leave faculty less inclined to retire at or around typical retirement age, Fidelity says — an prospect that’s already concerning to administrators who hope baby boomer professors will make way for younger faculty with new ideas and lower salaries.
Some 8 in 10 “pre-retiree” faculty – those 55 and older – are confident they will have enough money to live comfortably in retirement, but only 17 percent have taken time to create an individualized retirement income plan, according to Fidelity’s Higher Education Faculty Study (about double that number have an investment plan, however).
The former, said John Campbell, a Fidelity vice president, is a detailed accounting of anticipated monthly income and expenditures, based on desired lifestyle, predicted life expectancy, and other factors. Without such a plan, he said, even those who feel comfortable approaching retirement based on their accumulated savings are missing a "critical piece of the puzzle."
|Extent of Retirement Income Planning||Under 55||
55 and Over
|Have thought about it in great detail but have no written plan||14%||27%|
|Have thought about it generally but have no written plan||60%||55%|
|Have a formal, written plan||15%||17%|
|Have not yet begun to think about it||10%||0%|
Among faculty under 55 years old, 15 percent report having a formal retirement income plan, but 26 percent say their top financial priority is managing daily living expenses. Just 21 percent say they’re most concerned with saving for retirement, compared to 44 percent of older faculty. Some 61 percent of younger faculty say they "often worry about their financial situation," compared to 47 percent of older faculty.
“Having confidence in their retirement savings may result in faculty members who are approaching retirement age not taking the time to create a retirement income plan, leaving them without a strategy to convert savings into lasting income,” said Rick Mitchell, executive vice president of tax-exempt retirement services, said in a statement.
The data released today are the second half of Fidelity’s faculty retirement survey. The first part of the study, released earlier this year, found that baby boomer professors are putting off retirement – in some cases indefinitely – for financial reasons, as well as personal and professional ones, namely that they enjoy their work too much to give it up.
An independent firm, Versta Research, conducted the survey earlier this year. Respondents included 195 full-time and part-time faculty who were eligible for full-time benefits at both public and private two- and four-year institutions.
On average, boomer faculty had saved $423,853 for retirement. Campbell declined to comment on what constituted "enough" when it comes to retirement savings, as each person's plan looks different, based on earnings during working years, investments and lifestyle.
Data released today also relate to faculty attitudes about retirement benefits, such as health care.
When considering future medical expenses, such as day-to-day health care, 81 percent of older faculty say they’re confident they can cover these costs. Only 54 percent of faculty over 55 say they’re confident about their ability to pay for long-term care, such as assisted living, however.
Just 52 percent of younger faculty are confident they can pay for future medical expenses, as they are less likely than their older counterparts to expect long-term health care benefits will be provided by their employer. For that reason, younger faculty overwhelmingly (84 percent) rate health care benefits as the most important feature for an institution-sponsored retirement program. By comparison, 72 percent of older faculty say it’s important for an institution-sponsored faculty retirement program to include retiree health care benefits.
Also important to both younger and older faculty is continued access to campus facilities.
|Important Features for Faculty Retirement Plan||
|55 and Over|
|Retiree health care benefits||84%||72%|
|Continued access to facilities||45%||56%|
|Emeritus status or other retiree appointments||40%||53%|
|Financial and retirement planning||42%||34%|
|Phase-out/transitional pay-out and duties||35%||34%|
|Office/research space for retired faculty||24%||29%|
Campbell said older and younger faculty’s differing expectations reflecting a changing benefits “landscape” for higher education.
“In some cases [institutions] already are rolling back benefits and that will continue,” he said.
According to data from the College and University Professional Association for Human Resources, there’s been a recent decline in employer-sponsored health care for retirees. In 2012, 58 percent of institutions responding to the organization’s annual Employee Health Benefits in Higher Education Survey said they offer health care benefits to retirees, compared to 52 percent in 2013.
Based on 2012 data from CUPA-HR, its most recent on the topic, 47 percent of institutions offer defined non-health care benefits to retirees, but most have a 403(b) contribution plan. Smaller percentages also have 457(b), 401(a) and 401(k) plans.
Older faculty have a better idea of what's going into those accounts, according to Fidelity. While 40 percent of younger faculty members are unsure of their asset allocation within their 403(b) plan, just 16 percent of older faculty are unsure.
Still, both older and younger faculty report needing some kind of financial guidance. About one-third each want help developing a retirement income plan; choosing specific investments; and assessing their overall financial plan.
Campbell said that's the study's biggest takeaway.
Fidelity’s findings are somewhat consistent with key findings from a 2011 TIAA-CREF study of faculty confidence about retirement, including that health care expenses are the biggest retirement financial concern among college and university employees (28 percent of those surveyed said they were not confident that they will have the financial resources to cover medical care).
That study had some additional findings, including that the college and university workforce is more confident regarding its prospects for a financially secure retirement than are American workers in general, Paul Yakoboski, senior economist, said in an e-mail. One-quarter of higher education employees are very confident in their retirement income prospects and 50 percent are somewhat confident, compared to 13 percent and 36 percent, respectively, for U.S. workers.