The average American worker's confidence in his ability to retire comfortably is declining, and fewer workers are actively saving for retirement this year than last year, according to a recent survey. In fact, roughly four out of every 10 respondents indicated that they are unsure if they will have enough money to live comfortably throughout their retirement, according to a survey issued earlier this month by the Employee Benefit Research Institute of Washington, D.C.

Sinking confidence and a decrease in the number of people actively saving for retirement are symptoms of diminished market returns, increased unemployment and participants lacking retirement goals, according to analysts.

The retirement confidence survey measures attitudes, confidence and readiness for retirement and is based on the responses of 1,000 retired and working individuals polled annually in January and February.

The 2001 survey is the eleventh annual survey conducted by the institute. This year's survey results are notable because they not only indicate a significant drop in retirees' and workers' financial confidence, but they also indicates fewer people than last year are saving for retirement. The number of respondents indicating they are saving for retirement dropped from 75 percent in 2000 to 71 percent in 2001, according to the study.

The percentage of respondents who indicated they are not at all confident that they will have enough money to live comfortably in retirement hit a seven-year high of 17 percent, up form 10 percent in 2000, according to the survey. The percentage of respondents indicating they were either very confident or somewhat confident sank from nearly 72 percent in 2000 to just 63 percent in 2001.

The survey's results reflect sinking markets and rising health care costs, according to Dan Devine, a spokesperson for EBRI. Many of the respondents in the survey, especially baby boomers, indicated that they are just beginning to realize how much of an impact rising health care costs will have on their ability to save for retirement, Devine said.

"Maybe over the last 12 to 18 months, health care costs have been rising and people have concerns about those costs," he said.

The slowing economy and rising unemployment rate have also taken a toll on workers' confidence levels as well as the number of people actively saving for their retirement, Devine said. Laid off workers are not allocating resources towards retirement savings, he said.

However, fund companies and other providers of retirement savings products can do a lot to insulate the assets invested in their retirement plans by educating participants on issues like health care costs and other costs associated with retirement, Devine said.

"Because [participants] are more aware, they can make adjustments for health care costs," he said. Participants who are aware of potential health care costs can plan accordingly. That, in turn, improves their overall confidence in having the needed resources for retirement, he said.

"Education is the key here," he said. Providers can hold onto assets by spending the needed resources to educate 401(k) participants, he said.

Education as a means of retaining assets is more important now than ever before because the 401(k) market is flattening, according to Joshua Dietch, a consultant with Cerulli Associates of Boston.

In recent years, the growth of the 401(k) market has been fueled almost entirely by market appreciation, he said. In 2000, many funds' 401(k) assets shrank because of poor market performance, creating a new emphasis by fund companies on retaining existing assets, he said

"I think certainly they have to have strong education programs that speak to participants at different stages of their lives," Dietch said.

A study released earlier this month by Cerulli Associates indicates the rate of adoption of new 401(k) plans dropped to eight percent per annum in 2000 from 15 percent per annum in the mid-1990's, according to the study.

Education is especially important given the fact that some participants may have been forced to put off retirement as a result of overexposure to one particular market sector, he said.

"There definitely needs to be a calming of the nerves in a downward market," he said.

Still, the 401(k) market has remained relatively static in the past year or two despite the turn around in the market, according to Trisha Brambley, president of Resources for Retirement Plans of Newtown, Pa., a consulting firm that advises plan sponsors on their retirement programs.

"Most plan sponsors that we work with feel that their employees aren't making radical changes and the reason they aren't doing this is because they [participants] don't know what to do," she said. But that does not mean that there isn't a need for the information, she said.

"There is a substantial percentage of employees that have never seen negatives on their statements, much less two quarters in a row," she said. "Having an asset allocation strategy for the long haul is more important now than ever before."

Fund companies are largely meeting those needs through improved websites, she said. In the past year, several firms including Mass Mutual of Springfield, Mass., Putnam Investments of Boston and Fidelity Investments, also of Boston, have all upgraded their 401(k) websites to provide more information for plan participants, Brambley said.

In addition, plan providers are holding more on site one-on-one meetings with participants, e-mail campaigns to help ease participants' anxieties and answer frequently asked questions in addition to addressing asset allocation issues and the bear market in newsletters, Brambley said.

Although participants are not moving their money as much as expected, they are interested in what is happening to their 401(k) accounts, according to Dennis Ackley, a vice president with J.P. Morgan/American Century Retirement Services of Kansas City, Mo.

J.P. Morgan/American Century decided to develop a special training course, consisting of suggested responses to frequently asked questions, for its telephone representatives to use after markets declined precipitously earlier this year, Ackley said. The responses are intended to get the participants to develop long-term investment horizons, he said.

"We don't want to imply that they should react to a bear market," he said. "The message is to them to think in the long-term."

The firm's phone representatives have also been trained to inform participants of the consequences of their investment decisions, whether there are tax implications or if they are locking in losses by cashing out of their 401(k) accounts, he said.

The firm has also responded to plan sponsors' requests for on-site teaching sessions to help improve participants' understanding of what impact the markets are having on their accounts as well as helping them develop a retirement goal, he said.

The volume of participant inquiries has risen, but phone volume has increased slightly while the firm's website, retireonline.com, has handled a large percentage of the increase, according to Ackley. Last year, 35 percent of participants' inquiries were handled by an automated telephone system while 14 percent was handled by personal telephone representatives and 51 percent was handled by the company website, according to a company spokesperson.

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