Retirement insecurity is now a reality for millions of Americans. In 2024, America will experience a unique demographic phenomenon called Peak 65, when more people will turn age 65 than at any time in history. At Peak 65, more than 12,000 Americans will turn 65 each day. That’s an estimated 24 million in 2024, according to census data quoted by Retirement Daily on The Street.
However, half of Peak 65 Americans have $100,000 or less in investable assets, according to the newly released 2023 Protected Retirement Income & Planning Study (PRIP) from the Alliance for Lifetime Income. That means a significant number of Americans are facing retirement without a secure income stream, putting them at risk of not being able to maintain their current standard of living or outliving their savings. As an employer, it’s important to understand this trend and the challenges millions of Americans are up against, and take proactive measures to support your employees’ retirement planning.
The PRIP study explores various reasons why Americans are facing income insecurity in retirement. One key factor, is the shift from traditional pension plans to 401(k) and other self-directed retirement accounts. Although these accounts offer more control and flexibility, they require individuals to make the investment decisions, making it difficult for many employees to adequately save for retirement. Additionally, a significant number of Americans face economic challenges throughout their working years, such as stagnant wages, high healthcare costs, and limited access to affordable housing, which further hinders their ability to save adequately for retirement.
The report emphasizes the importance of addressing this issue for both employees and employers. Employees approaching retirement without a secure income are more likely to experience financial stress, which can adversely affect their well-being and productivity in the workplace. On the other hand, employers may face increased healthcare costs due to delayed retirements and could encounter challenges in attracting and retaining talented employees if they’re unable to adequately address retirement planning within their ageing workforce.
Employers have an important role in ensuring their employees’ financial well-being, both during their working years and into retirement. Here are some steps you can take to support your workforce in securing a more stable income in retirement:
- Provide Education and Communication: Make sure your employees have access to comprehensive retirement planning resources, including workshops, seminars, and online tools, to help them understand the importance of saving early and making informed investing decisions. Encourage regular communication about retirement planning options and benefits to keep employees well-informed.
- Offer Retirement Savings Plans with Automatic Features: Consider offering retirement savings plans, such as 401(k) or similar accounts, with employer matching contributions. Automatic features such as auto enrolment and auto escalation have been shown to significantly increase participation and savings rates. Make sure retirement benefits are easily accessible and clearly communicated to employees, promoting participation and consistent contributions.
- Implement Financial Wellness Programs: Offer financial wellness programs that cover a broad range of topics, including budgeting, debt management, and retirement planning. These programs can empower employees to take control of their day-to-day finances and make informed decisions about saving and investing for their future.
- Provide Access to Professional Advice and Assistance: Collaborate with financial advisors and retirement planning experts to provide personalized guidance to employees. Offering access to professionals who can provide individualized retirement planning advice can greatly enhance employees’ ability to make well-informed choices and improve their retirement readiness.
- Embrace Flexible Work Arrangements and Phased Retirement: Explore flexible retirement options, such as phased retirement or part-time work arrangements, which can help employees transition into retirement gradually while maintaining a stable income.
The growing number of Americans approaching retirement without a secure income is an important issue worthy of employers’ attention. By taking proactive measures and implementing comprehensive retirement planning strategies, employers can empower their employees to achieve greater financial security in their retirement years. Providing education, offering retirement savings plans, promoting financial wellness, and offering professional guidance are vital steps toward ensuring a more secure and fulfilling retirement for your workforce.
