Workers nearing retirement face numerous decisions regarding when and how they will transition into retirement, but few employers provide things such as educational resources, information about distribution options, planning materials, ability to make systematic withdrawals, referrals, or an annuity as a payout option, according to a new report.
Based on a survey of more than 1,800 employers, the 17th Annual Retirement Survey by the Transamerica Center for Retirement Studies seeks to better understand employers’ views on their employees’ future retirement, the extent to which they have business practices to support them, and the current state of retirement benefits offered.
Finding that some employers feel less responsible than others for helping their employees achieve a financially secure retirement, the survey shows that 64% of employers say they feel responsible, but only 17% feel “very responsible” and 47% feel “somewhat responsible.” In addition, 18% of all employer respondents say they are “indifferent,” while another 18% do not feel responsible at all.
The findings also reveal changing views on working past age 65 and flexible retirement. Nearly 70% of employers believe that most employees at their company could work until age 65 and still not save enough to meet their retirement needs. In addition, 72% agree with the statement, “Many employees at my company expect to work past age 65 or do not plan to retire,” including 24% who “strongly agree” and 48% who “somewhat agree.”
Transitioning into Retirement
Even though many employers are aware of savings shortfalls and the need among their employees to work past age 65 and fully retire at an older age, few employers apparently are doing enough to help them transition into retirement, the report explains.
“It is imperative that policymakers and the retirement industry work together to make it as easy, affordable, and worry-free for employers to offer retirement plans, employee benefits, and flexible retirement options – ultimately to enable American workers to achieve a financially secure retirement,” says Catherine Collinson CEO & President, Transamerica Institute and Transamerica Center for Retirement Studies.
Among those currently offering retirement benefits, many are not extending eligibility to their part-time employees and many have not yet adopted plan features such as automatic enrollment and the Roth 401(k) option. Moreover, despite plan sponsors’ emphasis on helping their employees’ save for retirement, surprisingly few across all plan sizes offer assistance to pre-retirees with regard to how they can manage their savings in retirement, the report shows.
For example, among all employer respondents, only 32% provide information about distribution options, 23% offer education about transitioning into retirement, and 17% offer an income annuity as a payout option in their retirement plan.
Given the changing dynamics of the workforce and to help address some of these issues, the report recommends steps that employers can take to help improve their employees’ retirement outlook, as well as steps that policymakers and workers can take.
Among the employer recommendations, the report suggests:
- If a plan is not already in place, take advantage of the tax credit available for starting a retirement plan or achieve administrative efficiencies by joining a multiple employer plan.
- Offer other health and welfare benefits that can enhance and protect workers’ long-term financial security.
- For employers who offer a retirement plan, extend eligibility to part-time workers or if this is unfeasible, promote the ability for workers to save for retirement in an IRA as an alternative.
- Add automatic enrollment and escalation features to increase retirement plan participation and salary deferral rates.
- Discourage loans and withdrawals from retirement accounts, and allow for an extended loan repayment time for terminated participants.
- Structure matching contribution formulas to promote higher salary deferrals (e.g., instead of matching 100% of the first 3% of deferrals, change the match to 50% of the first 6% of deferrals).
- Provide educational materials regarding saving and investing, such as information on the Saver’s Credit, calculating a retirement savings goal and generating retirement savings to last throughout their lifetimes.
- Offer pre-retirees greater levels of assistance in planning their transition into retirement–including education about distribution options, retirement income strategies, and the need for a backup plan if forced into retirement sooner than expected.
- Create opportunities for workers to phase into retirement by allowing for a transition from full-time to part-time and/or working in different capacities.
- Foster an aging-friendly work environment and adopt diversity and inclusion business practices that includes age among other commonly referenced demographic factors.
The results are based on a 21-minute online survey of a nationally representative sample of 1,802 employers conducted from Nov. 20 to Dec. 20, 2016, with respondents targeted based on job title at for-profit companies who make decisions about employee benefits at their company and employ five or more employees.
