Dive Brief:
- One-third of American workers said they think they will struggle with their finances in retirement or that they will never be able to retire, according to a study of 700 contribution-plan participants and 300 non-participants from Natixis. The majority — made of workers who take an optimistic view of their financial futures — may need to reevaluate their spending and saving habits, the report indicated. Of millennials, Gen Xers and boomers, no generation is perfectly prepared for retirement, Natixis said.
- Millennials underestimated how much they'll need in retirement, pinning the number at $822,789, and said they plan to retire at age 61, which means they'll need to save 19% more every year than if they retired at 67. Members of Gen X also underestimated how much they'll need to retire, but by less, as they submitted an average projection of $980,466. Baby boomers will need to put away an average of $142,000 each year to reach their goal of having $1 million in savings for retirement. A quarter of boomers have already made a withdrawal from their plans, the report found.
- Daily expenses, general debt, housing costs, healthcare costs and the immediate expenses to enjoy prevent respondents from saving more for retirement, the report said.
Dive Insight:
As HR pros worry about how to funnel talent into the workplace, they also fret over how to make sure workers make their exit at the right time. Their fears aren't unfounded; nearly two-thirds of workers have no retirement account assets, according to a report from the National Institute on Retirement Security. The survey also found that, when accounting for all working-age individuals, the median retirement account balance is $0.
Recent research from Monster reported that the average worker wants to retire by the age of 62. But employees know this might not be possible; a third of workers said they worry about finances at work, according to an Employee Benefits Research Institute and Greenwald & Associates study. Employees said they want employer assistance with retirement planning, with 75% expecting to need help calculating how much to put away for a secure retirement. Few said they thought budgeting or debt counseling would help them.
With a majority of workers lacking plump savings accounts and some even giving up on the idea of retiring at all, it follows that talent professionals will name retirement readiness as a top concern. While older workers are knowledgeable and experienced, their far-extended presence could slow the promotion pipeline, creating a potential talent problem for an incoming youth generation that wants to move up the ladder quickly. It's important for employers to recognize, however, that the Age Discrimination in Employment Act (ADEA) prohibits them from replacing retirement-aged workers with younger ones for the express purpose of ridding their payrolls of aging employees.
Instead, employers can take action with ADEA-compliant measures that help workers prepare for retirement. Employers can offer automatic enrollment in 401(k) plans, which require employees to take steps to opt out of their defined contribution plan, rather than requiring them to opt into one. Organizations can also consider offering phased retirement plans that allow workers to ease into retirement.
