Saving for Retirement: Whose Job Is It?
Surely you've seen the bumper sticker that reads: "Failure to plan on your part does not constitute an emergency on my part." The slogan may seem a tad harsh, but some exasperated HR managers must have days when they embrace the sentiment. And the exasperation is sometimes warranted when it comes to trying to convince employees to prepare for retirement. Despite the reality that employer pension plans can no longer be looked to as the sole or primary source of income for retirees, an alarming trend persists among a percentage of U.S. workers: failure to plan for retirement.
Retirement benefits are prized by most U.S. workers, so much so that "retirement or pension plans" was cited by 76% of 1,200 adults who were asked to identify workplace benefits and characteristics most important to them. The poll, conducted by the Center for State and Local Government Excellence, found that retirement benefits ranked among the top four things that matter most to respondents, following health insurance, job security and clear policies and procdures (Elmer, 2008).
Nonetheless, plenty of U.S. employees fail to start saving for retirement early enough, don't save adequately when they do start, and fail to effectively manage their assets, according to Watson Wyatt Worldwide ("Many," 2007). Watson Wyatt assessed pooled data on the 401(k) plans of employees earning $10,000+ at 32 U.S. companies and found that younger workers and employees at the highest pay levels alike are not bothering to sign up for pension plans. Watson Wyatt also found that 39.6% of workers age 50 to 64 have set aside less than one year's salary in their defined contribution plans.
So, it's little wonder that - now that traditional defined benefit plans are quickly fading into memory - employers worry that workers cannot or will not save for themselves in a way that allows them to meet their retirement needs. Aon Consulting's 2007 Benefits and Talent Survey of more than 2,107 U.S. employers reveals that 98% of the respondents believe it's important that their employees be made aware of how much they need to save in order to retire when they wish and maintain their desired lifestyle, but there is no consensus on the most efficient method for communicating this information (Aon Consulting, 2007).
Employees themselves are not especially happy with most of today's communication programs, another sign that employers should look for better practices in this area. The Employee Benefit Research Institute's 17th annual Retirement Confidence Survey of 1,001 workers and 251 retirees found that 73% of workers saving for retirement reported that they made use of informational materials from the plan provider or their employer to make financial decisions. However, only 15% said they found that information helpful. The most helpful source of retirement planning information, cited by 64% of respondents, was a financial professional (Helman et al., 2007).
Some employers are paying attention to such feedback and taking action. According to a survey of 422 respondents by Deloitte Consulting LLP and the International Society of Certified Employee Benefit Specialists, the majority (62%) of benefit specialists said they planned to revamp their retirement benefits in the near future. Of those that anticipate changes, most expect to provide employees with better retirement-planning tools, including enhanced pre-retirement planning sessions at 36% of the companies (Deloitte Consulting LLP, 2007).
Mindful that HR should avoid directing individual employees on how best to invest their retirement savings, some employers are offering workers retirement strategy planning workshops and individual sessions with financial planners. AARP noted that most of the employers on its 2007 list of the best 50 U.S. employers for workers over age 50 offer some sort of financial planning assistance or education as a benefit (Olson, 2007).
Another strategy some employers are embracing is "making decisions that put employees on a generic path toward success," said David Wray, president of the ProfitSharing/401(k) Council of America. A survey of 146 large U.S. firms by Hewitt Associates predicted that more than half (58%) of respondents would automatically enroll new hires in 401(k) plans in 2007. Thirty-six percent already do automatic sign-ups, and the Pension Protection Act of 2006 contains some new rules likely to move even more firms into automatic enrollment plans, said Wray (Coombes, 2007) .
But even with employers prodding and in some cases stepping in to get workers to start saving, it's clear that the time has come for a sea change in how workers prepare for retirement.
For more information:
For more information on this and similar issues, please see i4cp's Graying of Society and Retirement Benefits Knowledge Centers.
Documents referenced in this TrendWatcher include the following:
Retirement benefits are prized by most U.S. workers, so much so that "retirement or pension plans" was cited by 76% of 1,200 adults who were asked to identify workplace benefits and characteristics most important to them. The poll, conducted by the Center for State and Local Government Excellence, found that retirement benefits ranked among the top four things that matter most to respondents, following health insurance, job security and clear policies and procdures (Elmer, 2008).
Nonetheless, plenty of U.S. employees fail to start saving for retirement early enough, don't save adequately when they do start, and fail to effectively manage their assets, according to Watson Wyatt Worldwide ("Many," 2007). Watson Wyatt assessed pooled data on the 401(k) plans of employees earning $10,000+ at 32 U.S. companies and found that younger workers and employees at the highest pay levels alike are not bothering to sign up for pension plans. Watson Wyatt also found that 39.6% of workers age 50 to 64 have set aside less than one year's salary in their defined contribution plans.
So, it's little wonder that - now that traditional defined benefit plans are quickly fading into memory - employers worry that workers cannot or will not save for themselves in a way that allows them to meet their retirement needs. Aon Consulting's 2007 Benefits and Talent Survey of more than 2,107 U.S. employers reveals that 98% of the respondents believe it's important that their employees be made aware of how much they need to save in order to retire when they wish and maintain their desired lifestyle, but there is no consensus on the most efficient method for communicating this information (Aon Consulting, 2007).
Employees themselves are not especially happy with most of today's communication programs, another sign that employers should look for better practices in this area. The Employee Benefit Research Institute's 17th annual Retirement Confidence Survey of 1,001 workers and 251 retirees found that 73% of workers saving for retirement reported that they made use of informational materials from the plan provider or their employer to make financial decisions. However, only 15% said they found that information helpful. The most helpful source of retirement planning information, cited by 64% of respondents, was a financial professional (Helman et al., 2007).
Some employers are paying attention to such feedback and taking action. According to a survey of 422 respondents by Deloitte Consulting LLP and the International Society of Certified Employee Benefit Specialists, the majority (62%) of benefit specialists said they planned to revamp their retirement benefits in the near future. Of those that anticipate changes, most expect to provide employees with better retirement-planning tools, including enhanced pre-retirement planning sessions at 36% of the companies (Deloitte Consulting LLP, 2007).
Mindful that HR should avoid directing individual employees on how best to invest their retirement savings, some employers are offering workers retirement strategy planning workshops and individual sessions with financial planners. AARP noted that most of the employers on its 2007 list of the best 50 U.S. employers for workers over age 50 offer some sort of financial planning assistance or education as a benefit (Olson, 2007).
Another strategy some employers are embracing is "making decisions that put employees on a generic path toward success," said David Wray, president of the ProfitSharing/401(k) Council of America. A survey of 146 large U.S. firms by Hewitt Associates predicted that more than half (58%) of respondents would automatically enroll new hires in 401(k) plans in 2007. Thirty-six percent already do automatic sign-ups, and the Pension Protection Act of 2006 contains some new rules likely to move even more firms into automatic enrollment plans, said Wray (Coombes, 2007) .
But even with employers prodding and in some cases stepping in to get workers to start saving, it's clear that the time has come for a sea change in how workers prepare for retirement.
For more information:
For more information on this and similar issues, please see i4cp's Graying of Society and Retirement Benefits Knowledge Centers.
Documents referenced in this TrendWatcher include the following:
- Aon Consulting. (2007). 2007 benefits and talent survey . Aon Consulting.
- Coombes, A. (2007, March 22). A brave new retirement world. Retrieved January 23, 2008, from http://www.i4cp.com/Hw2Ebc
- Deloitte Consulting LLP. (2007). Top five total rewards priorities for 2007 . Deloitte Consulting LLP.
- Elmer, V. (2008, January 22). What matters most. Washington Post , p. D02.
- FedEx announces intent to modernize pensions, switch to cash balance formula. (2007, March 5). Human Resources Report , 237.
- Helman, R. M. et al. (2007). The retirement system in transition. The 2007 retirement confidence survey . Employee Benefit Research Institute.
- Many workers fail to save enough, make poor investment choices, survey finds. (2007, March 19). Human Resources Report , 293.
- Olson, E. (2007, October 23). A few lessons on saving, courtesy of employers. New York Times . Retrieved from www.newyorktimes.com
Lary Crews,
Knowledge Center Manager
For 22 years, using a succession of ever faster computers, I pursued a full-time freelance writing career in the Tampa Bay area, writing more than 1,000 magazine articles and columns and four published paperback books. My first two novels, Kill Cue and Extreme Close-Up, published in 1990 by Bantam/Lynx, have been republished and are available on Amazon.com. For 8 years, concurrent with my writing career, I was America’s first online fiction instructor, on AOL. From my home office, I taught more than 4,000 students in 27 states how to write their first novel, meeting with them in a virtual classroom once a week. In 2005, I became a Knowledge Center Manager for a what is now i4cp. Typically, for a dyed-in-the-wool freelancer like me, I work from my home office in historic Saint Petersburg FL.