Client Service

Many Participants in the Dark About Retirement Readiness

Plan sponsors can provide participants with a variety of tools to help them determine whether they are on the right track to retire on time.

By Javier Simon | May 18, 2017
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More Americans are working past the traditional retirement age of 65 than they have since the turn of the century, according to a recent study by the Pew Research Center. The survey found 18.8% of Americans at least 65-years-old reported being employed part-time or full-time in May 2016. That translates to 9 million people laboring through their golden years. It also marks a steady increase in the amount of people employed at this age and older, which Pew has tracked since 2000 when the rate stood at 12.8%.

This phenomenon could put employers at a major disadvantage as they struggle to endure rising benefits costs and a younger workforce with less room for advancement.

And while many Americans are workingpast retirement age because they want to, several are doing so because they’re unaware they are financially secure enough to retire. Tim Walsh, senior managing director, TIAA-CREF, says this is something his firm has been working to counter in the non-profit sector.

“Plan sponsors can follow some steps to help clear a batter path for those reluctant retirees,” says Walsh.

He notes that path begins with effective communication and providing participants with the tools and resources they need to determine whether they will be ready to retire on time, or need to take further action to prepare. An important aspect of that strategy could be lifetime-income projections based on factors such as account balances, savings rates, investments and capital market assumptions. In fact, Congress is currently looking at the LifetimeIncome Disclosure Act, which would require employers to take similar steps.

Walsh says even monthly-income projections on participant statements can be enough to trigger participants to start thinking about how they are going to spend their retirement years and what they need to save for.

“What we’ve heard from participants is that they tend to think in buckets,” Walsh explains. “They want to make sure they have a bucket of dollars to pay for all core expenses whether it’s food, shelter, or clothing. The second bucket is the ‘fun bucket.’ They want to be able to fund vacations and spend money on grandkids. A third is for potential emergency needs and health care expenses. If there is anything left over, legacy is important for a lot of participants.”


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