Most Workers Don’t Plan to Retire at 65—or at Any Age
A report by the Transamerica Center for Retirement offers a 10-step plan for increasing retirement security among Americans at a time when most workers expect to retire after age 65, if at all.
Ah, retirement: The reward for a lifetime of hard work and savings. That’s the American dream, but the reality is 58 percent of American workers now expect to retire after age 65 or not at all, a new Transamerica Center for Retirement Studies’ report found. Many cite reasons related to income and benefits.
“Most plan to do so because they want or need the income (53 percent), yet many also cite reasons of enjoying what they do and wanting to stay involved (34 percent),” Catherine Collinson, president of the center and Transamerica Institute, testified recently before the U.S. Senate Special Committee on Aging.
These workers envision a phased transition into retirement including both work and leisure. Unfortunately, few employers have practices in place to support them. For example, only one in four employers offer pre-retirees the ability to shift from full-time to part-time work.
“In today’s world, individuals are increasingly expected to self-fund a greater portion of their retirement income, but they need help in order to be successful,” Collinson said.
Few Americans Happy with Retirement
The report comes as fewer American retirees say they are “very satisfied” with their retirements, while a growing number of retirees report that they are “not at all satisfied” with their retirements, according to the Employee Benefit Research Institute in Washington, D.C.
The Transamerica report, which offers a 10-step plan to close the gap between employers’ retirement offerings and workers’ needs, found 89 percent of workers value retirement benefits as an important workplace benefit, and 90 percent of workers offered 401(k) or similar plans are saving for retirement.
“As policymakers and industry seek to expand retirement plan coverage among American workers, it should be acknowledged that plan sponsorship rates are relatively high with room to grow and that part-time workers should be a special area of focus and attention,” Collinson said in a statement.
Gap in Benefits for Part-Time Workers
According to the survey, 74 percent of companies offer a 401(k) or similar employee-funded plan. Despite the high percentage of employers that offer plans, the survey findings reveal a pervasive gap in plan coverage among part-time workers. Only 38 percent of employers that offer a plan extend eligibility to part-time workers.
“By addressing the coverage gap among part-time workers, policymakers can also help improve the retirement outlook of women and lower-income workers who are more likely than other demographic segments to work part-time,” Collinson said.
Another key step for employers to increase retirement security among their workers involves automatic enrollment in 401(k) and similar plans.
“Automatic enrollment, which automatically enrolls employees into the plan with the ability for them to opt out, is widely recognized as one of the most effective ways to increase plan participation rates; however, relatively few 401(k) plan sponsors offer it, despite its appeal to workers,” Collinson said.
Further, automatic escalating is a retirement plan feature that increases a participant’s contributions to the plan, typically by 1 percent a year or when they receive a pay increase. Only 28 percent of plan sponsors offer automatic escalation in contrast to the 67 percent of workers who find the idea appealing.
Another step employers can take is to help educate workers on how “leakage” from retirement accounts can severely inhibit their long-term savings. Among workers who are currently participating in a plan, 23 percent have taken a loan or early withdrawal from their 401(k) or IRA, with top-cited reasons indicating they may lack emergency savings or insurance coverage—or they are paying off consumer debt. While access to funds through loans and hardship withdrawals can encourage plan participation, greater education is needed in simple and clear terms of the risks and negative consequences. Limiting the number of loans allowable by the plan can help, too.
Addressing Workers’ Caregiver Responsibilities
Employers can tackle a hidden threat to retirement security by addressing the caregiver responsibilities of their workers.
Given increases in longevity and the high cost of assisted living and long-term care, many workers will be called upon to be an unpaid family caregiver for an aging parent or loved one at a time in which they are balancing their careers, raising children and saving for their own retirement. The resulting reduction of work hours or time off from the workforce for caregiving can negatively affect their future retirement security.
This offers employers a chance to help employees balance work with caregiving responsibilities. Just 58 percent of employers accommodate caregiving employees by offering flexible work schedules. For more suggestions on benefits that will increase your organization’s ability to retain valued employees, please contact us.
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In this issue:
This Just In...
How Elections Could Affect Employer Health Plans
COBRA and the Affordable Care Act
Most Workers Don’t Plan to Retire at 65—or at Any Age
What’s Hot in Insurance? Short-Term Care Policies