Working Beyond Normal Retirement Age Impacts Outcomes

401k Plan DesignWorking beyond normal retirement age has a dramatic impact on an employer’s costs.  But there is more.  Financial wellness programs help to deliver positive benefits for both employees and employers.  So, how does an employer decide if they want to support employees working beyond normal retirement age?  Financial wellness programs can increase retirement plan participation and help improve retirement outcomes.  This sounds good to most of us.  In so doing, financial wellness programs also help reduce employers’ healthcare costs for older employees.  That’s what the data reflects.  Employees who decide to continue working beyond normal retirement age can represent an expensive workforce.   The cost can reach upwards of $50,000 per employee per year for a one-year delay in retirement, according to a Prudential study.  When retirement is delayed for two or more years, the cost is even higher.

In light of financial stress caused by the pandemic, financial wellness programs now serve another purpose.  Financial wellness programs can help both employers and employees by reducing financial stress and preparing workers for economic volatility, according to a recent BenefitsPro article.  This is important, because post-coronavirus, older employees’ retirement plans could be impacted by the fact that they stopped contributing to their retirement plan, or tapped their retirement savings, during the pandemic.  A third of workers have already taken some dramatic actions since the start of Covid-19.  These workers have either taken a loan or a withdrawal from their qualified retirement account, or they plan to do so.  This according to a Transamerica Center for Retirement Studies survey.

However, working longer may not be a viable strategy, as health problems or other unforeseen issues can arise.  There can be dire consequences for employers when employees are working beyond normal retirement age.  There are usually higher healthcare costs for an aging workforce.  Younger employees feel stifled when they observe fewer opportunities to advance in their careers.  So having workers working beyond normal retirement age can lead to higher employee turnover since there are fewer good opportunities to advance.

Financial wellness programs can help in a variety of ways, including:

Teaching the value of participating in a 401(k) plan.  Most 401(k) savings and investing decisions are made by participants who may not have the financial know-how to make the best choices for their future.  For instance, 25% of employees don’t take advantage of employer matching contributions, which translates to $24 billion left on the table annually, according to a Financial Engines study cited by BenefitsPro.  Financial wellness programs can help improve stats like these.

Helping workers understand how to close retirement savings shortfalls.  More than half (57%) of American workers have no retirement savings, which means collectively, they have a $4.3 trillion savings deficit.  A financial wellness program should boost retirement plan participation and savings rates.

Preventing against retiring with debt.  Americans carry a lot of debt, to the tune of $134,600 for those age 45 to 54, and $108,000 for those ages 55 to 64, according to The Federal Reserve Bank of New York.  Financial wellness programs can help workers manage their debt better – research on the impact of financial wellness shows a 27% increase in credit card users that pay their balance in full each month, noted BenefitsPro.

A solid financial wellness program delivers benefits beyond improved retirement plan participation and on-time retirements.  It can help employees manage their money better.  Thus, employees are less stressed and more productive at work.  This should result in a boost to each employers’ bottom line.  When done right, financial wellness programs benefit everyone.


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