A brief from
May 2016
Public Workers Preparing for Retirement
Top findings from a survey of Michigan’s state employees
Overview
State and local pension systems have adopted significant reforms in recent years in an effort to become fiscally
sustainable. Today, policymakers across the country are considering additional changes to public retirement
benefits as they work both to meet their commitments and help ensure the financial futures of their workers.
The impact of these reforms on recruitment and retention of a talented workforce remains unclear, and the need
to understand workers’ thoughts and attitudes about retirement benefits is growing.
In order to meet this need, The Pew Charitable Trusts and the Michigan Office of Retirement Services
commissioned a survey of Michigan state workers (“Michigan survey”) in early 2015. SSRS, a national
independent research company, conducted the survey to gain insight into how public employees enrolled in the
state’s defined contribution plan (“Michigan state workers”) value their benefits, to gauge their expectations
about retirement, and to see how well these benefits meet workers’ needs. Michigan has a long-established
mandatory defined contribution retirement program for state employees, providing an excellent opportunity to
examine public workers’ views on retirement benefits. A number of other states provide a mandatory or optional
defined contribution plan for state workers, and most provide a mandatory or optional defined contribution plan
plan for university employees.
Survey respondents included state employees who are health care and social work professionals, highly skilled
workers such as engineers and lawyers, clerical workers, and skilled trade workers. Municipal workers and
teachers were not part of the sample because they belong to separate retirement systems.
Michigan, along with Alaska and Oklahoma, has switched from a defined benefit pension plan to a mandatory
defined contribution retirement plan for new state employees. Since 1997, all new eligible Michigan state
employees have been enrolled automatically in the defined contribution plan. At the start of 2015, 32,575 state
workers were enrolled in the plan.
In addition to providing the findings from the survey, this brief compares the results to Pew’s nationwide survey
of state and local government workers (“national state and local workers”), conducted in collaboration with the
Center for State and Local Government Excellence (“national survey”) in late 2013.
Key findings
The Michigan survey suggests seemingly conflicting attitudes about retirement, with many state workers
expressing some unease about the future but also saying they plan to retire earlier than many other workers.
Among the key findings:
•• About three-quarters of Michigan state workers contribute enough to their account to receive the full
employer match, and most of these workers said they cannot afford to contribute any money in addition to
that amount.
•• Michigan state workers generally report lower confidence than state and local government workers in other
states that they will be able to receive their full Social Security benefits, and that they will have the resources
to live comfortably in retirement. In addition, nearly all say they would like access to guaranteed income in
retirement.
•• Despite doubts over their future well-being, Michigan state workers generally expect to retire earlier than the
average U.S. worker, and most said they are satisfied with their salary and retirement benefits.1
•• Michigan state workers’ views on retirement and compensation differ by age. Younger workers generally see
retirement planning as a lower priority and express a greater preference for higher salary, instead of more
generous retirement benefits, than do those 30 and older.
How the Michigan plan works
Newly eligible Michigan state workers are automatically enrolled in the state’s pretax account, starting with a 3
percent default employee contribution. The state adds to that by providing a default contribution of 4 percent of
salary and also matches the employee’s contribution dollar for dollar up to 3 percent. Together, this amounts to
a total default contribution of 10 percent of salary: 3 percent from the employee and 7 percent from the state.2
Employees then may add to their contributions, up to the limits set by the Internal Revenue Service.3
Also by default, the contributions are invested in target date funds managed by State Street Global Advisors, with
investments based on birth date and an anticipated retirement age of 65.
These Michigan workers are immediately vested in their own contributions and any earnings on those
investments. After two years of service, they are 50 percent vested in the state’s contributions. That share rises
to 75 percent after three years and 100 percent after four.
Participants over age 591/2 who are still actively employed by the state may begin withdrawing from their
accounts without penalty. Upon retirement, Michigan state workers in the plan can choose among multiple
payout options, including lump sum, installments (e.g., monthly, quarterly, or annually), or a combination of
regular installments and a lump sum. The state provides employees who want to purchase an annuity with
information on how to transfer their balances to an approved annuity provider. In addition to the defined
contribution plan, Michigan state workers also participate in and contribute to Social Security.
Several studies have found that most retirees need 70 to 80 percent of their final average salary in retirement
from all sources of savings and benefits to maintain their pre-retirement standard of living.4 One analysis, based
on achieving a replacement rate of about 80 percent of pre-retirement income, recommends a total annual
savings rate of at least 12 percent of pay (18 percent for those not covered by Social Security).5 Figure 1 compares
state contribution levels for a select sample of state defined contribution plans. Some states, like Michigan, have
a mandatory defined contribution retirement plan, while others offer employees a choice between a defined
contribution and a defined benefit plan.
State employees in Montana and Oklahoma receive smaller employer contributions than Michigan state workers,
while Utah offers more generous state contributions.
2
Figure 1
State Plan Contributions Vary Widely
40%
Default employer and employee contributions for select state defined contribution
plans
35%
40%
35%
25%
20%
15%
10%
30%
Percentage of salary
Percentage of salary
30%
10.15%
25%
15%
7
5%
10%
0
5%
%
3%
Michigan*
0
Montana*
Default employee contributions
40%
30%
20%
10%
0
Utah*
8%
Colorado
Alaska
10%
8%
Ohio
Colorado
Ohio
Default employer contributions
Note: Oklahoma’s plan affects employees first hired on or after Nov. 1, 2015. Montana’s employer contribution will gradually increase to
8.03 percent by 2023. States in this figure represent a cross section of state defined contribution plans that are mandatory for state workers
(Alaska, Michigan, and Oklahoma), and a selection of plans that are optional for state workers. More than 40 states have mandatory or
optional defined contributions plans for university workers; typically these plans plans have much higher contribution rates averaging 8 to 10
percent for employers and 5 to 8 percent for employees. Most of the university plans participate in Social Security.
Sources:
70% Alaska Public Employees’
% Retirement System; Colorado Public Employees’ Retirement Association; Michigan State Employees’
Retirement System; Montana Public Employee Retirement Administration; Ohio Public Employees Retirement System; Oklahoma Public
Employees
Retirement System; and Utah Retirement
Systems
%
60%
66
Percentage of Michigan state workers
very or somewhat confident
Percentage of Michigan state workers
very or somewhat confident
50%
Oklahoma*
10
8.5%
%
Default employer contributions
Default employee
contributions
* State plans participating
in Social
Security
60%
%
4.19%
5%
%
%
6
10
7.9% 4.19% %
8%
%
5
6
7%
10%
%
7.9
8%
%
Montana*
Oklahoma*
Utah*
Alaska
5
3%
Michigan*
70%
10.15% 8.5
5%
20%
© 2016 The Pew Charitable Trusts
50%
66
57%
49%
46
Confidence in retirement security varies by age, income, and
education
%
49
40%
%
57%
46%
Michigan state workers expressed low levels of confidence when asked a range of retirement-related questions,
most
dramatically about whether the Social Security system would be able to fully pay their benefits in
30%
retirement. About a quarter (27 percent) said they were very or somewhat confident that Social Security would
20% to provide them with their full benefits,
20%while 71 percent said they were either not too or not at all
be able
%
15in the program. Confidence in Social Security
confident
20%providing full benefits is lowest among younger workers,
%
10%
15 of Michigan state workers under age 30 saying they were very or somewhat confident in the
with only 15 percent
system,
compared
with 46 percent of those 50 and30-49
older.
Under 30
50+
0
Under 30
30-49
50+
Michigan state workers
also voiced relatively low confidence
about retirement security more generally
and
medical expenses. Just over half (54 percent) said they are very or somewhat confident that they will live
Confidence in Social Security paying full benefit in retirement
Confidence in living comfortably in retirement
comfortablyConfidence
in retirement,
while
43
percent
said
they
were
very
confident
or somewhat confident in their ability
in Social Security paying full benefit in retirement
Confidence in living comfortably in retirement
to pay for medical expenses in retirement.
3
40%
35%
40%
25%
20%
15%
10%
5%
0
35% confidence among Michigan state workers follows a U-shaped pattern by age (see Figure 2), with
Retirement
confidence highest among younger and older workers and lowest for the middle-aged. About 66 percent of those
30%
%
under age 30 said they were somewhat or very confident, while 49 percent of 30- to 49-year-olds
expressed
25% that they will have enough money to live comfortably in retirement. A greater number (57 percent) of
confidence
%
%
those 50 and older said they feel confident about retirement, though that is still lower than for people
% in their 20s.
Percentage of salary
Percentage of salary
30%
10.15
5
20%
4.19%
7.9
10.15
8.5
Confidence in the ability to pay for retirement
also varies depending on income
education level, and is %
%
15%
%
%
%8.5
5% aand
significantly lower for Michigan
state
workers
with
lower
incomes
and
without
bachelor’s
degree. About 46
%
%
%
% % less than $50,000 a year report being somewhat or very confident
percent10%
of
4.19earning
%Michigan state workers
%
6%compared10
that they will have
with%51 percent of%those earning $50,000
to $99,999,
7enough money in% retirement,
10%
%
5%
8
7.9
8
Alaska
Michigan*
Montana*
Oklahoma*
Utah*
Colorado
Ohio
and 71 percent of those making at least $100,000
Meanwhile, about half (49 percent) of those with less
5%willa year.
3% are confident that they
0
than a college
education
live comfortably in retirement, compared with 57 percent of
Alaska
Michigan*
Oklahoma*
Utah*
Colorado
Ohio
those with a college
degree orMontana*
more education.
7
3
6
10
8
5
Default employee contributions
10
8
Default employer contributions
Figure 2
Default employee contributions
Default employer contributions
Younger Michigan State Workers Are More Confident Than Older
Workers About Living Comfortably in Retirement
Those under age 30 are less confident that Social Security will pay full benefits
50%
40%
30%
20%
10%
66%
70%
60%
Percentage of Michigan state workers
very or somewhat confident
Percentage of Michigan state workers
very or somewhat confident
70%
66%
60%
57%
49%
50%
49%
40%
57%
46
%
46%
30%
20%
15
10%
0
0
20%
%
20%
15
%
Under 30
30-49
Under 30
50+
30-49
Confidence in Social Security paying full benefit in retirement
Confidence in Social Security paying full benefit in retirement
50+
Confidence in living comfortably in retirement
Confidence in living comfortably in retirement
Source: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015
© 2016 The Pew Charitable Trusts
4
Michigan state workers expect to retire earlier than workers nationwide, and almost all
would like to receive some amount of their retirement benefit as guaranteed lifetime
payments
The expected age of retirement varies widely, but more Michigan state workers expect to be working after age
65 (32 percent) than retire before age 60 (19 percent). Nearly half expect to retire between ages 60 and 65,
while 6 percent said they plan to never fully retire. In general, Michigan state workers plan to retire earlier than
all workers nationwide. According to the Retirement Confidence Survey conducted in 2015, 9 percent of U.S.
workers expect to retire before age 60, while 46 percent plan to retire after age 65.6 (See Figure 3.) Overall, 48
percent of Michigan state workers plan to retire before age 65, compared with 25 percent of all U.S. workers in
the same survey.
Figure 3
Michigan State Workers Expect to Retire Earlier Than Average U.S.
Worker
50%
50%
40%
40%
30%
20%
Percentage of workers
Percentage of workers
Almost 20% expect to retire before age 60
46%46%
30%
21% 21
% 18
18
%
19% 19
%
%
16% 16
%
%
9% 9
0
0
%
29% 29
20%
10%
10%
32%32
%
Under 60
Under 60
60-64
Michigan state workers
Michigan state workers
60-64
65
Expected retirement age
Expected retirement age
65
66 or older
66 or older
U.S. workers
U.S. workers
Note: The 66 or older category includes people who expect to never fully retire.
Sources: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015; and the
Employee Benefit Research Institute’s Retirement Confidence Survey, 2015
50%
40%
30%
20%
10%
60%
© 2016
The Pew Charitable Trusts
Percentage of Michigan state workers
Percentage of Michigan state workers
60%
50%
40%
30%
34%
44%
34%
44%
20%
23
51%
45% %46
45 46
%
%
23
%
%
10%
51
%
21%
21%
28
%
28%
5
9%
10%
0
Percentage of work
Percenta
20%
29
30%
29 %
16
19
%
%
20%
18%
32%
21%
21%
%
199%%
18
%
Michigan state workers are most likely to expect to16
retire between the traditional ages of 60 and 65, but the state
10%
survey suggests that younger workers are more likely to expect to retire earlier than older workers. Roughly 34
%
Under 60
60-64
65
66 or older
930
percent of those under age
expect to retire before age 60, while only 9 percent of those 50 or older plan to
0
Expected
retirement
retire that
early. (See Figure 4.) Michigan state
workers
50 or age
older are twice as likely as workers under age 30 to
Under
60or later (46 percent versus
60-64 23 percent).
65
66 or older
expect
to
retire
at
age
66
Michigan state workers
U.S. workers
Expected retirement age
Figure 4
Michigan state workers
U.S. workers
Older Michigan State Workers Are Twice as Likely as Younger State
Workers to Expect to Retire After Age 65
More than a third of younger workers expect to retire before age 60
60%
50%
40%
30%
20%
10%
0%
Percentage of Michigan state workers
Percentage of Michigan state workers
60%
50%
51%
44%
51
44%
40%
34%
30%
34%
28%
23
%
20%
21%
23%
28%
21%
9%
10%
0%
Under 30
%
9
50 or older
30-49
Under 30
Before 60
%
45% 46
%
45% 46
%
60-65
30-49
50 or older
66 or older
Before 60
60-65
66 or older
Note: The 66 or older category includes people who expect to never fully retire.
Source: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015
© 2016 The Pew Charitable Trusts
Almost all Michigan state workers (92 percent) said they contribute to their retirement savings plan, and of
those who do, 81 percent contribute enough—3 percent of pay—to get the maximum state match of 7 percent.
Among those who contribute enough to receive the full match, about three-quarters said they contribute the
most they can afford. This means most Michigan state workers are saving about 3 percent of their paychecks for
retirement. Middle-aged workers, however, are most likely to say they are financially squeezed. Just 16 percent of
those ages 40 to 49 said they can afford to contribute more, compared with 28 percent of workers under age 30
and 33 percent of those 65 and older. Only 22 percent of Michigan state workers listed retirement planning as a “top” priority, though a majority (57
percent) said it is a “pretty big” priority. Older state workers are more likely to use retirement planning services
and to say that saving is a priority, though a majority of younger workers said it is a top or pretty big priority. Just
7 percent of 60- to 64-year-olds and 10 percent of workers 65 and older said that retirement planning was “not
that big” a priority, compared with 27 percent of those ages 30 to 39 and 34 percent of those under age 30.
6
Figure 5
Retirement Planning Becomes a Bigger Priority With Age
But it is still a priority for many younger workers
65 or older
60-64
53%
60-64
50-59
Ages
Ages
58%
65 or older
40-49
32%
50-59
21%
40-49
12%
30-39
30-39
14%
Under 30
Under 30
0%
0%
53%
%
%
%2 7%
59% 759
2%
32%
61%
21%
60%
12%
49%
14%
20%
%
%
10
10% 3%
29% 3
%
%
40% 740
7%
29%
58%
20%
40%
40%
60%
60%
80%
%
%
117
1%
%
%
%
27% 127
1%
34%
49%
60%
61%17
80%
3%%
34
100%
3%
100%
A top priority
A pretty big priority
Not that big a priority
Not a priority at all
A top priority
A pretty big priority
Not that big a priority
Not a priority at all
Source: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015
© 2016 The Pew Charitable Trusts
Despite the importance that Michigan state workers placed on retirement planning, many expressed uncertainty
The health and medical
5%
%
The health
about
howand
to medical
best manage 5
their
finances. They were more than two times as likely to say they prefer
17%retirement
coverage
provide
17%
coverage provide
%
by
toemployer
managebytheir
retirement
investments
themselves
as have that done by their employer (67 77
percent
to77
31%
employer
%
Extremely
imp
Extrem
Very importan
Very im
5 5 percent%said they were very confident in their own investing skills. Michigan state workers
percent). Still, only
5
21%
%
74%
were more evenly divided when asked if they21prefer that their retirement investments be managed
by
%
74investment
%
8
(52 percent) or themselves
(46 percent). Overall, the vast majority said they want to receive
The abilityprofessionals
to balance
8% 22%
The ability to balance
work and family
22%
% guaranteed lifetime
their retirement
benefit either partially (42 percent)
or entirely (47 percent) as a series
work and family
70of
70%
%
5
payments. Only 11 percent answered
that
they
want
to
receive
their
retirement
benefit
entirely
as
a lump sum.
%
5
%
The security of your job
The security of your job
Your total annual salary
Your total annual salary
Somewhat/no
Somew
30
30%
64%
64% would prefer
Michigan
are generally
satisfied with their compensation, and a majority
8%
The retirement
plans state workers
%
8
Thegenerous
retirement plans
more
retirement benefits
in exchange
for31lower
salaries
31%
provided
by your
%
provided by your
employer
employer
61%
61%
Michigan state workers are generally satisfied with their salaries
and benefits;
25 percent said they are very
44
44%
A career in public service
31% half said%they were somewhat
A career in with
public their
servicesalary level, while more
satisfied
than
satisfied (54 percent). About
31
23%
23%
17 percent said they are very satisfied with their retirement benefits, and 51 percent said they are somewhat
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
20%
30%
40%both salary
50% and benefits.
60%
70%
80%
satisfied. About 60 percent
are10%
very or somewhat
satisfied
with
%
Percentage of Michigan state workers
Percentage of Michigan state workers
The survey asked respondents to rate the importance of various factors linked to work benefits and
compensation.
The state
each
as extremely important,
very important, somewhat important,
Somewhat/not too/not
at allworkers
important could rank
Very
important
Extremely important
Somewhat/not too/not at all important
Very important
Extremely important
not too important, or not at all important. Over 90 percent listed health coverage, salary, job security, retirement
benefits, and work-life balance as either very or extremely important. (See Figure 6.) Most listed health coverage
(77 percent), job security (74 percent), and work-family balance (70 percent) as extremely important factors.
7
21%
40-49
40-49
30-39
%
1230-39
Under 30
Under 30
61%
21%
60%
12%
14%
49%
14%
17%% 1% 17% 1%
61
27% 1% 27% 1%
60%
34%
49%
3%34%
3%
Salary and retirement plans were not far behind; 64 percent and 61 percent, respectively, listed these factors as
0%
0% 20%
20% 40%
40% 60%
60% 80%
80% 100%
100%
extremely
important.
Figure
6
A top priority
A pretty big priority
Not that big a priority
Not a priority at allNot a priority at all
A top priority
A pretty big priority
Not that big a priority
Health Insurance, Job Security, and Work-Life Balance Are the Most
Important Factors for Michigan State Workers
A career in public service is less important to most
%
The health and medical
The health and5medical
coverage provide coverage provide
by employer
by employer
5%
The security of your
jobsecurity of your job
The
5%
17%
5%
8
The ability to balance
The ability to balance
work and family work and family
%
5%
Your total annual salary
Your total annual salary
8%
The retirement plans
The retirement plans
provided by your provided by your
employer
employer
A career in public service
A career in public service
0%
10% 0%
17%
21%
77%
21%
8% %
22
5
%
8
%
74%
22%
30%
70
30%
64%
31%
31%
31%
44
31%
20% 10%
23%
30% 20%
74%
%
%
23%
77
%
40% 30%
50% 40%
61%
Extremely imp
Extr
Very importan
Very
Somewhat/no
Som
70%
64%
61%
44%
60% 50%
70% 60%
80% 70%
80%
Percentage of Michigan
state workers
Percentage
of Michigan state workers
Somewhat/not too/not
at all important
Very important
Somewhat/not
too/not at all important
Extremely important
Very important
Extremely important
Source: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015
© 2016 The Pew Charitable Trusts
While younger Michigan state workers prefer higher salaries over generous retirement benefits, nearly
half would rather have better benefits
Michigan state workers by a wide margin said that before working in the public sector, they expected the
government to offer better retirement benefits than private employers (65 percent to 8 percent). A majority said
they prefer more generous retirement benefits over higher salary. However, those with incomes under $50,000
are significantly more likely than those with incomes over $100,000 to say they prefer a job with a higher
salary and fewer retirement benefits (46 percent compared with 33 percent) Furthermore, a slight majority of
younger workers (52 percent) expressed a preference for higher salaries in exchange for less generous retirement
benefits. (See Figure 7.) Michigan state workers who are at least age 50 are about two times more likely to say
they would rather have more generous retirement benefits than higher salaries with less generous retirement
benefits (65 percent versus 31 percent).
8
Figure 7
Nearly Two-Thirds of Older Michigan State Workers Prefer More
Generous Retirement Benefits Over a Higher Salary
Younger workers are almost evenly split
70%
60%
50%
40%
30%
20%
10%
0
Percentage of Michigan state workers
Percentage of Michigan state workers
70%
65%
60%
52
48% 48%
40%
50%
%
52%
56% 56%
65%
41% 41%
30%
31% 31%
20%
10%
0
Under 30 Under 30
30-49
30-49
50 or older
50 or older
Age groupAge group
Better retirement
benefits benefitsHigher salary
Better retirement
Higher salary
Source: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015
© 2016 The Pew Charitable Trusts
Most Michigan state workers said they do not expect to leave
their
jobs any time soon. About three-quarters
41%
41%
college graduate
Not collegeNot
graduate
%
(77 percent) expected to work for their current employer
Among workers under age 30, 53
38retirement.
38% until
%
% the 30
percent
expected
to
stay
until
retirement.
Among
younger
state
workers
anticipating a job change, about half
30
Income < $50,000
Income < $50,000
%
%
24
24
expected to leave for the private sector.
62% 62%
Married Married
%
62%
There are some challenges to comparing Michigan state workers to%62
national
state and local workers
%
58
58
across the Female
U.S. Female
%
55% 55
%
73%
White/non-Hispanic
The
Michigan survey was conducted as a follow-up to Pew’s 2013 national survey of73state and
local
% government
White/non-Hispanic
79% 79
%
workers. Several methodological considerations may limit
comparisons
between
the
surveys.
37
37%
Democrat Democrat
%
35
%
35online, with%a small percentage of respondents completing
First, the Michigan survey was largely administered
39
39%
Age over 50
%
Age overthe
50 national survey, on the other% hand,
27was
paper copies;
conducted
via telephone. Research has demonstrated
27
%
39
In union
that the survey
mode
can influence respondents’ answers,
questions
for which
39% particularly on attitudinal 67
%
In union
%
respondents may feel pressure to answer in a more positive light in telephone 67
interviews.7 This difference
20%
80%
could have affected0 results.0Second,
Michigan
state 40%
workers40%
knew that
their 60%
employer was
the 100%
20%
60%
80% a sponsor of 100%
Percentage
of workers
survey, which may have led them to answer certain questions
more positively
or negatively; neutral research
Percentage of workers
organizations carried out the national survey.
National state and local workers
National state and local workers
Michigan state workers
Michigan state workers
9
M
Michi
NatioN
70%
70%
%
65
%
65
In addition, all participants in the Michigan survey%were state employees, but the national survey included
50%
56
50%teachers and local government
% workers. The surveys
56% were conducted over a year apart, with the national survey
52
%
52
fielding in
the%fall
48
% of 2013 and the Michigan survey in early 2015. Lastly, Michigan state workers are in a defined
40%
48retirement
40%contribution
system, while most national state and local
% workers in the earlier survey were in defined
41
41%
benefit or pension plans.
Percentage of Michigan state workers
Percentage of Michigan state workers
60%
60%
30%
30%
%
Michigan state workers are similar in many ways to state and local workers nationwide,31
but
31they
20%
20%generally express lower retirement confidence and are less satisfied with their retirement benefits
%
10% With
10%
those challenges in mind, a comparison of the Michigan and the national survey samples suggests that
Michigan state workers and state and local workers across the country are similar in terms of such demographics
0
0as education, gender, marital status, race and/or ethnicity, and political affiliation. The national state and local
30
30-49
50 or older
worker sampleUnder
isUnder
substantially
older, however, and Michigan
likely
30
30-49 state workers are much more
50 or
olderto be members
Age
group
of a union.
Age group
Figure
8
Better retirement benefits
Better retirement benefits
Higher salary
Higher salary
Workers From the National and Michigan Surveys Share Many
Demographic Traits
Michigan workers are much more likely to be part of a union
Not college graduate
Not college graduate
30% %
30
24% %
24
Income < $50,000
Income < $50,000
Married
Married
62% %
%
6262
62%
%
58 %
58
55% %
55
Female
Female
White/non-Hispanic
White/non-Hispanic
Democrat
Democrat
Age over 50
Age over 50
27% %
27
In union
In union
0
Michi
Mich
Natio
Nati
41% %
41
38 %
38
%
0
20%
20%
37% %
37
35% %
3539%
39%
39% %
39
40%
40%
73% %
73 79%
79%
67% %
67
60%
60%
80%
80%
100%
100%
Percentage of workers
Percentage of workers
National state and local workers
National state and local workers
Michigan state workers
Michigan state workers
Sources: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015; and
SSRS’ survey of state and local workers for The Pew Charitable Trusts, 2013
© 2016 The Pew Charitable Trusts
The two groups also report similar plans for retirement, including their expected retirement age, the income levels
they think they will need in retirement, and how much they expect to rely on Social Security.
10
Figure 9
Michigan State Workers Mirror National Opinions on Retirement
Planning
Matching expectations about when they expect to retire
Mic
19%
19%19%
Percentage expecting to
retire before age 60
Percentage expecting to
retire before age 60
M
Nat
19%
Percentage expecting to
retire after age 65
Percentage expecting to
retire after age 65
16%
Annual income needed in retirement
($75,000 to less than $100,000)
14%
Annual income needed in retirement
($75,000 to less than $100,000)
Social Security (percentage expect
to provide about half of income)
32%
16%
14%
26%
%
2629
%
29%
Social Security (percentage expect
to provide about half of income)
0
5%
0
10%
15%
5%
10%
N
33%
32% 33%
20%
15%
Percentage of workers
25%
20%
30%
25%
35%
30%
35%
Percentage of workers
National state and local workers
National state and local workers
Michigan state workers
Michigan state workers
Note: The percentage expecting to retire after age 65 includes people who expect to never fully retire.
Sources: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015; and
SSRS’ survey of state and local workers for The Pew Charitable Trusts, 2013
© 2016 The Pew Charitable Trusts
Very satisfied with employer’s
Very satisfied with employer’s
retirement benefits
retirement benefits
34% 34%
When compared with state and local %
workers%across the nation, Michigan state workers report different views on
17
their retirement security expectations. The Michigan cohort seems to have less confidence in retirement benefits
% to pay
in
including
in Social Security and their ability
30% for medical expenses. While 39 percent of workers
Notgeneral,
confident
ability toin
Notinconfident
ability to
comfortably
in the retire
national
survey
are very or somewhat confident that Social Security
pay full retirement benefits, only
retire comfortably
% will
46% at another way, 60 percent of state
27 percent of Michigan state workers expressed the same sentiment. Looked
and local workers nationally are not confident that Social %
Security
35% will pay full retirement benefits. That rises to 71
Notinconfident
Not confident
ability toin ability to
percent
of
Michigan
state
workers.
The
Michigan
workers
also
report less confidence that they will have enough
medical expenses
pay medicalpay
expenses
% %
money to retire comfortably, 54 percent compared with 69 percent in the national57
sample. They also said they
feel less secure about their ability to pay medical bills, 42 percent compared with 65%
percent
% of state and local
60
NotSocial
confident
Social Security
Notworkers
confident
Security
nationwide.
will pay full benefits
17
30
46
35
57
60
71%71
Fewer Michigan state workers expressed high satisfaction with the retirement benefits provided by their
will pay full benefits
%
0%
10%
20%
30%
40%
50%
60%
70%
80%
employer than did those
survey
34 percent
The70%
divide
between
0% in the national
10%
20% (17 percent
30% versus
40%
50%very satisfied).
60%
80%
Percentage
of workers
the two groups is little changed when comparing the percentage
of Michigan
state workers who are either very or
Percentage of workers
somewhat satisfied (68 percent) to state and local workers nationwide (85 percent). This gap appears to hold up
regardless ofNational
retirement
plan
and
population characteristics.
See Appendix B for more details.
state and
local
workers
Michigan state workers
National state and local workers
Michigan state workers
11
Mic
M
NaN
26 %
29 %
29
to provide
about half
of income)expect
Social Security
(percentage
to provide about half of income)
0
5%
0
10%
5%
15%
10%
20%
15%
Percentage of workers
25%
20%
30%
25%
35%
30%
35%
Percentage of workers
Figure 10
National state and local workers
Michigan state workers
National state
and localWorkers
workers
Michigan
stateConfident
workers
Michigan
State
Are
Less
About Their Future
Retirement Than Are State and Local Workers Nationwide
Many are concerned about Social Security and paying for medical expenses
Very satisfied with employer’s
benefits
Very retirement
satisfied with
employer’s
retirement benefits
17% %
17
Not confident in ability to
retire
comfortably
Not
confident
in ability to
retire comfortably
Mic
M
Nat
N
34% %
34
30% %
30
35% %
35
Not confident in ability to
confident
in ability to
payNot
medical
expenses
pay medical expenses
46% %
46
57% %
57
60% %
60
Not confident Social Security
Notwill
confident
Security
pay fullSocial
benefits
will pay full benefits
0%
0%
10%
National state and local workers
National state and local workers
10%
20%
20%
30%
30%
40%
40%
50%
Percentage of workers
Percentage of workers
50%
60%
71% %
71
60%
70%
70%
80%
80%
Michigan state workers
Michigan state workers
Sources: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015; and
SSRS’ survey of state and local workers for The Pew Charitable Trusts, 2013
© 2016 The Pew Charitable Trusts
Conclusion
Beginning in 1997, Michigan enrolled all new state workers in a defined contribution plan, which has become
the primary retirement plan for state employees. The findings from our Michigan survey indicate that most
employees participate and make sufficient contributions to receive the full employer match. However, Michigan
state workers reported conflicting opinions about their future retirements. Most expect to retire at or before age
65, a lower age than U.S. workers in general, but they report less satisfaction with their retirement benefits and
are less confident in Social Security or their ability to live comfortably after exiting the labor force than state and
local workers nationwide.
Personal needs and preferences differ, however, and retirement confidence and job satisfaction often vary by
workers’ demographic and economic situations. In particular, middle-aged state workers in Michigan appear
to be less confident in their ability to retire comfortably. In addition, younger state workers are more likely to
prefer higher salaries in exchange for less generous retirement benefits. Although the majority of Michigan
state workers with defined contribution plans are generally satisfied with their retirement benefits, this survey
highlights some challenges.
12
Appendix A: Methodology
The Michigan survey was conducted for The Pew Charitable Trusts and the Michigan Office of Retirement
Services by SSRS, a national independent research company. A total of 6,000 state employees were invited
to participate. The response rate was 41.5 percent, yielding a total sample of 2,471 employees enrolled in the
defined contribution plan. Interviews took place between Jan. 5 and Feb. 23, 2015, with about 88 percent
(n = 2,168) conducted online and 12 percent (n = 303) via mail. The margin of error was plus or minus 2.33
percentage points at the 95 percent confidence level.
Appendix B: Comparison of Michigan state workers and
national state and local workers
Table 1
Retirement Security for Michigan State Workers and National State
and Local Workers by Demographic and Worker Characteristics
National
survey
Michigan
survey
Difference
Not confident in Social Security system
60%
71%
11%
Not confident in ability to retire comfortably
30%
46%
16%
Not confident in ability to pay medical expenses
35%
57%
22%
Very satisfied with employer’s retirement benefits
34%
17%
17%
Not confident in Social Security system
48%
51%
3%
Not confident in ability to retire comfortably
31%
42%
11%
Not confident in ability to pay medical expenses
34%
54%
20%
Very satisfied with employer’s retirement benefits
35%
15%
20%
Not confident in Social Security system
58%
72%
14%
Not confident in ability to retire comfortably
30%
49%
19%
Not confident in ability to pay medical expenses
33%
62%
29%
Very satisfied with employer’s retirement benefits
33%
15%
18%
Retirement characteristics
Overall
Over age 50
In a union
(continued on next page)
13
Retirement characteristics
National
survey
Michigan
survey
Difference
National survey respondents in defined benefit plans only compared with all respondents in the Michigan
survey
Not confident in Social Security system
57%
71%
14%
Not confident in ability to retire comfortably
27%
46%
19%
Not confident in ability to pay medical expenses
31%
57%
26%
Very satisfied with employer’s retirement benefits
39%
17%
22%
National survey respondents in alternative retirement plans compared with all respondents in the Michigan
survey
Not confident in Social Security system
54%
71%
17%
Not confident in ability to retire comfortably
32%
46%
14%
Not confident in ability to pay medical expenses
39%
57%
18%
Very satisfied with employer’s retirement benefits
32%
17%
15%
National survey respondents who are state workers compared with all respondents in the Michigan survey
Not confident in Social Security system
51%
71%
20%
Not confident in ability to retire comfortably
30%
46%
16%
Not confident in ability to pay medical expenses
36%
57%
21%
Very satisfied with employer’s retirement benefits
40%
17%
23%
National survey respondents who are local workers, teachers, and other education workers compared with
all respondents in the Michigan survey
Not confident in Social Security system
62%
71%
9%
Not confident in ability to retire comfortably
31%
46%
15%
Not confident in ability to pay medical expenses
34%
57%
23%
Very satisfied with employer’s retirement benefits
32%
17%
15%
Notes: National state and local workers in a defined benefit plan or who are local workers and/or teachers are compared against the entire
sample of Michigan state workers, as there is no equivalent categorization in the Michigan survey. Alternative plans are anything other than a
traditional defined benefit pension, including cash balance, hybrid, 457, 403(b), and TIAA-CREF plans.
Sources: SSRS’ survey of Michigan state workers for The Pew Charitable Trusts and the Michigan Office of Retirement Services, 2015; and
SSRS’ survey of state and local workers for The Pew Charitable Trusts, 2013
© 2016 The Pew Charitable Trusts
14
Endnotes
1
The expected retirement age of the average U.S. worker comes from the Retirement Confidence Survey and includes both public and
private sector workers.
2 There is also an additional contribution for employees who started on or after Jan. 1, 2012, and are not eligible to receive subsidized
retiree health insurance. For these employees, employers contribute an additional 2 percent matching contribution that, along with the
employee contribution, is apportioned to a personal health care fund to help pay for medical expenses in retirement.
3
For more information on Michigan’s defined contribution plan for state workers see https://stateofmi.voya.com/einfo/pdfs/forms/
michigan/640001/MICH_PLAN_HIGHLIGHTS_GPS.pdf.
4 John Karl Scholz and Ananth Seshadri, “What Replacement Rates Should Households Use?” working paper, University of Michigan
Retirement Research Center (2009), http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp214.pdf; and Aon Consulting,
“Replacement Ratio Study: A Measurement Tool for Retirement Planning” (2008), http://www.aon.com/about-aon/intellectual-capital/
attachments/human-capital-consulting/RRStudy070308.pdf.
5 The study uses assumptions such as rate of return and annuitization rate that may be higher than current market levels. Roderick B.
Crane, Michael Heller, and Paul J. Yakoboski, “Best Practice Benchmarks for Public Sector Core Defined Contribution Plans,” TIAA-CREF
Institute (July 2008), https://www.tiaa-crefinstitute.org/public/pdf/institute/research/trends_issues/pub_dc_plan_design_crane_heller_
yako.pdf.
6 Ruth Helman, Craig Copeland, and Jack VanDerhei, “The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key
Factor in Americans’ Retirement Confidence,” EBRI Issue Brief, no. 413 (April 2015), https://www.ebri.org/pdf/briefspdf/EBRI_IB_413_
Apr15_RCS-2015.pdf.
7 Pew Research Center, “From Telephone to the Web: The Challenge of Mode of Interview Effects in Public Opinion Polls” (May 2015),
http://www.pewresearch.org/2015/05/13/from-telephone-to-the-web-the-challenge-of-mode-of-interview-effects-in-public-opinionpolls/.
15
For further information, please visit:
pewtrusts.org/pensions
Contact: Ken Willis, officer, communications
Email: [email protected]
Phone: 202-540-6933
Project website: pewtrusts.org/pensions
The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Pew applies a rigorous, analytical
approach to improve public policy, inform the public, and invigorate civic life.