‘Tis the season for reporting on trends, especially those likely to hit big in 2017.
401k participant outcomes are especially relevant, and TIAA conducted a series of surveys to better understand the support Americans want and need in their retirement planning. Three key insights emerged that it says “can help plan sponsors guide employees on the path toward achieving it.” They are:
-
Educate Employees on Income for Life
There are significant disconnects between Americans’ attitudes and behavior when it comes to guaranteed monthly income for life in retirement. People want lifetime income options—in fact, almost half say that their retirement plan’s No. 1 goal should be providing guaranteed monthly income in retirement—but 41 percent are unsure if their current plan has that as an option. Plan sponsors are in a unique position to ensure that employees have access to and understand their options for the provision of lifetime income.
In particular, plan sponsors can help their employees be realistic about how much income they will need in retirement, according to the company. Sixty-three percent of Americans who are not retired estimate they will need less than 75 percent of their current income to live comfortably. However, most experts recommend replacing 70 to 100 percent of current income in retirement.
“It is vital for employees to estimate how much money they’ll need in order to live comfortably in retirement and take advantage of the tools that help identify how they can secure a stream of income they can’t outlive,” Ron Pressman, CEO of Institutional Financial Services at TIAA, said in a statement. “Having a source of guaranteed income can help savers be better prepared to deal with ongoing retirement expenses, such as healthcare, as well as unexpected events.”
-
Urge Employees to Tap Financial Advice
“People benefit from professional financial advice,” the company bluntly states, noting that 61 percent of those who have received advice feel confident about their financial situation, compared to 37 percent of people who haven’t. But many do not realize it’s within reach.
Employers can play a key role in helping employees get access to financial advice. It’s clearly a benefit that many employees would value, because three in four Americans surveyed say they would be more likely to consider a job if it offered financial advice at no additional cost as part of a benefits package. That figure increases to 87 percent among Gen Yers. In fact, the prospect of financial advice at no additional cost was the most popular among various free perks an employer could offer–more popular than on-site medical care or free lunch prepared by an on-site chef.
-
Play a Key Role in Planning Ahead
Getting an early start on retirement planning can make a big difference: Among TIAA retirees, those who began preparing before age 30 were more likely to retire before age 60. The majority (97 percent) of those early planners who were surveyed say they are satisfied with their retirement.
Employers can play a key role in helping their employees achieve satisfaction by introducing resources for all stages of the financial planning process. Customizable planning tools tailored support based on employees’ life stages can help employers get their employees in a retirement frame of mind, regardless of an employee’s life stage. These tools can make it easier for employees to evaluate their personal risk tolerance, asset allocation, and the current status of Social Security and Medicare to help them better envision their future retirement and the steps they can take to set themselves up for success.
“The transition from working to retired life can be a significant adjustment for people, but careful preparation can help alleviate anxieties and boost financial confidence for employees,” Pressman said. “Employers can provide access to the tools and resources at work, but also encourage employees to create a shared vision with their loved ones about how retired life may be for them and their families.”
Putting It All Together
While many employers are committed to helping employees achieve their retirement goals with features like financial education and lifetime income options on the retirement plan’s investment menu, employees may not realize they could be using these benefits.
“Encouraging employees to explore and leverage the full range of benefits their plan offers while they are working can help lead to better outcomes when it’s time to retire,” said Pressman. “Year-end is the perfect time to help employees get reacquainted with plan features and make sure they are using them to their advantage in the New Year.”