Trading Pay For Benefits

Workers Would Trade Pay for BenefitsAn increasing number of U.S. workers are willing to trade some of their pay for more generous retirement and healthcare benefits, according to a survey by Towers Watson.

Fifty-five percent of respondents are willing to pay more from each paycheck to ensure a guaranteed retirement. That compares with 46% two years ago. Fifty-percent of respondents would trade a portion of their pay to have healthcare benefits if they retire before they are eligible for Medicare, versus 40% in 2009.

“Since the economic crisis, employees have been paying much closer attention to their retirement readiness and many are willing to look at new ways to balance their mix of pay and benefits,” said Kevin Wagner, a senior retirement consultant at Towers.

Retirement security has become especially important to older employees who may be facing declines in their retirement accounts and their home values. But, the growing interest in retirement security is not limited to older workers. In fact, some of the most dramatic changes in attitudes have been among younger employees and those with a defined benefit plan. Seventy percent of defined-benefit plan participants who are younger than 40 are willing to pay for a guaranteed retirement benefit compared to 66% in 2011 and 39% in 2009.

Forty-four percent of workers are worried about reductions to their retirement benefits over the next two years. Younger defined benefit plan participants are particularly concerned (63%).

Employees are even more concerned about healthcare costs. Seventy-three percent are concerned about higher out-of-pocket health costs and co-pays over the next two years, compared to 67% in 2007.

The rise in healthcare costs is the most important reason employees are concerned about retirement security, cited by 64% of respondents. Fifty-six percent cited concerns over Social Security or Medicare benefits and higher prices for necessities.

Older employees, women, lower-paid workers, and those with health issues are most willing to relinquish control over their retirement investments in exchange for more long-term stability in their retirement benefits.

For more information, visit http://www.towerswatson.com/newsletters/insider/6411.