As the employment landscape continues to evolve, plan sponsors face a critical challenge: ensuring the long-term financial well-being of their employees while navigating the short-term concerns and constraints of their businesses. In the realm of retirement planning, this challenge is particularly pronounced, as plan sponsors must balance immediate needs with future objectives. When it comes to leveraging their employee benefits packages to enhance employee retirement readiness and reaping the associated benefits for their business, are plan sponsors playing the long game?
Short-term realities: Addressing immediate concerns
Today, employees are grappling with pressing financial worries. Data shows that 90% of retirement savers are worried about the impact of inflation on their retirement income, while 76% across all age ranges fear running out of money in retirement.¹ Additionally, 76% of stressed employees say financial worries have had a negative impact on their productivity.² Providing education, tools and product solutions for employees that may help alleviate financial stress can have an immediate impact on their quality of life and ability to be productive at work.
Competing financial priorities pose challenges as employees balance important protection solutions, like life insurance, supplemental health insurance and health savings accounts with long-term retirement savings. Financial wellness programs can play crucial roles in addressing these concerns, offering tools and resources to manage finances effectively and alleviate stress, ultimately improving overall productivity. Addressing short-term financial worries can also positively impact long-term retirement outcomes, as stressed employees are less likely to save adequately for retirement and express lower confidence in their retirement readiness.
Long-term goals: Fostering financial security
While addressing immediate concerns is crucial, plan sponsors must also adopt a long-term perspective when it comes to their benefit offerings. The main long-term focus for employers is helping employees prepare and plan for life after work: retirement. A significant majority of employers surveyed (76%) feel highly responsible for their employees’ retirement readiness, with 75% acknowledging that they need to play a role in helping employees generate income during retirement.³ Additionally, 68% of employers surveyed express a strong sense of responsibility for the long-term financial security of their retired employees.⁴
With five generations in the workforce today, employers face the challenge of creating a benefits package that meets the needs of individuals at all different stages of their financial journeys. Even those just starting in the workforce are worried about retirement according to our research, with 42% of Gen Z surveyed stating they are concerned about having enough income in retirement.⁵ Education and tools for younger employees are mutually beneficial for employees and employers in having financially healthy and productive employees. Understanding ways to further retirement readiness across all groups of employees can give an employer an edge.
Navigating the path forward: Focus on retirement readiness in the short and long-term
Collaboration and innovation are essential as plan sponsors navigate retirement readiness. Financial professionals can provide employers with valuable insights and guidance to help optimize the retirement plan through thoughtful plan design that directly addresses participants’ unique concerns and needs.
To fulfill long-term goals, plan sponsors must embrace innovative solutions beyond traditional retirement planning paradigms. In-plan income options offer a valuable opportunity to provide employees with a reliable stream of retirement income, allowing participants to convert their plan assets into a monthly paycheck guaranteed to last a lifetime. This not only enhances an employer’s benefit package and aids in recruitment efforts but also helps contain costs by allowing older employees to retire when they want, reducing compensation and medical plan expenses to the employer. Product innovation efforts have accelerated since the passage of the Secure Act and Secure 2.0 legislation, providing valuable fiduciary protections and a variety of options for employers to choose from.
The desire for in-plan income options is palpable among employees, with 83% expressing a preference for employers to offer such choices after learning more about these solutions.⁶ However, the reality falls short, as only less than a third of plan sponsors report that their plan offers an in-plan option today.⁷ This discrepancy highlights the disconnect between employee expectations and current offerings, emphasizing the need for plan sponsors to bridge this gap and provide solutions that meet the evolving needs of their workforce. Research indicates that 69% of plan sponsors turn to their plan advisor or consultant to make decisions on plan design and investment decisions, suggesting that they would be more likely to consider in-plan options if they were recommended.⁸
The journey toward retirement readiness requires plan sponsors to strike a delicate balance between short-term realities, long-term goals and broader challenges. By addressing immediate concerns, fostering long-term financial security, navigating the regulatory landscape and containing costs, employers can chart a course toward greater financial security for their employees. As we navigate the path forward, let us remain committed to playing the long game and empowering employees to achieve a secure and prosperous retirement.
SEE ALSO:
- Plan Sponsors Lean on Fixed Income, Inflation Protection to Boost Retirement Readiness
- 3 Ways Financial Education Empowers Plan Sponsors and Employees at All Levels
- Q&A with MFS’ Jeri Savage: Plan Sponsor, Participant Surveys Uncover New Opportunities for Advisors
¹Greenwald Research, 2023 In-Plan Insights Program Plan Survey
²2022 PwC Employee Financial Wellness Survey
³Greenwald Research, 2023 In-Plan Insights Program Survey
⁴Greenwald Research, 2023 In-Plan Insights Program Survey
⁵Lincoln Financial, Consumer Sentiment Tracker, January 2024
⁶Greenwald Research, 2023 In-Plan Insights Program Survey
⁷Greenwald Research, 2023 In-Plan Insights Program Survey
⁸Greenwald Research, 2023 In-Plan Insights Program Survey