As the average lifespan increases, many Americans worry about having saved too little for a lengthy retirement. This fear is translating into employees who count on working past traditional retirement age.
In fact, most wouldn’t consider a person to be “too old” to work until they were around 75.
But companies have a different point of view, according to a recent report by Transamerica Center for Retirement Studies (TCRS).
In its 18th Annual Retirement Survey, employer respondents said they would consider a person who is age 70 (median) “too old” to work.
To be fair, two-thirds of business owners thought it would “depend on the person.” Fewer workers (54 percent) felt this way.
Employees are nonetheless uneasy about being allowed to work longer. Even though 82 percent of employers said they would support people working past 65, only 72 percent of workers think that this is the case. And while seven in 10 companies consider themselves to be “aging friendly”—meaning they offer opportunities, training and tools to encourage the success of workers of all ages—just 56 percent of employees perceive them this way.
It’s entirely possible the lack of confidence among workers is unwarranted. However, in their defense, employers aren’t doing much to quell their anxiety. Just 23 percent of businesses surveyed have a formal diversity and inclusion policy statement that addresses age.
Further, a mere one in five employers offer some sort of phased retirement program for employees who’d like to transition into retirement. Yet almost half of workers envision retiring this way. Many would like to work fewer hours (30 percent) or transition into either a less demanding or more personally fulfilling position (17 percent) before hanging up their hat for good.
But on one point companies and their workers can agree—and it’s not pretty. Survey respondents think retirement security is likely to be out of reach for many Americans. Just 16 percent of employers and 18 percent of employees are “very confident” that workers will be able to fully retire with a comfortable lifestyle.
“Employers play an all-critical role in promoting retirement security among workers, yet it’s important to remember that their raison d’être is running a business. Working together, policymakers and the retirement industry must make it as easy, affordable and worry-free as possible for employers to offer retirement plans along with other employee benefits and flexible retirement options to their employees,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said in a statement.
The Current State of 401(k)s and Opportunities to Enhance Retirement Security
“Employer-sponsored retirement plans, including 401k and similar employee-funded plans, have proven to be the most effective way to facilitate long-term savings among workers,” Collinson added. “Unfortunately, not all workers have equal access.”
Based on its research findings, TCRS’ report highlights several areas in which employer-sponsors and plan advisors could do more to improve employee outcomes:
- Retirement Plan Sponsorship Is Lacking Among Small Companies. Sixty-five percent of employers offer a 401k or similar plan. However, these plans are more commonly available for employees of large (92 percent) and medium companies (86 percent), and less commonly for small companies (59 percent).
- Most Non-Sponsors Are Not Planning to Offer a Plan. Among employers that do not offer a 401k or similar plan, only 27 percent said they are likely to begin sponsoring a plan in the next two years. The most often cited reasons for not doing so include: company is not big enough (58 percent), concerns about cost (41 percent) and employees are not interested (22 percent). There’s a glimmer of hope, however, as 25 percent of employers that are not likely to offer a plan said they would consider joining a multiple employer plan offered by a reputable vendor who handles many of the fiduciary and administrative duties at a reasonable cost.
- Few Part-Time Employees Are Eligible to Participate. Among employers that offer a plan, only 41 percent extend eligibility to part-time workers. The likelihood of extending eligibility to part-time employees is higher among medium (60 percent) and large companies (54 percent) than among small companies (37 percent).
- Adoption of Automatic Enrollment Is Low. Eighty-one percent of workers find automatic enrollment appealing. In stark contrast, only 22 percent of plan sponsors have adopted automatic enrollment, including 28 percent of both large and medium companies, and 17 percent of small companies. Plan sponsors that offer automatic enrollment do so at a default contribution rate of 5 percent (median) of an employee’s pay.
- Plan Sponsors Can Do More to Assist With Retirement Transition. Workers nearing retirement age tend to feel overwhelmed. The study finds that plan sponsors are not doing much to help employees transition their savings and finances into retirement, and 22 percent do “nothing.”
- Other Health and Welfare Benefits Can Help Improve Financial Security. In addition to retirement benefits, employee benefits such as health, life and disability insurance—along with employee assistance, workplace wellness and financial wellness programs—may enhance workers’ financial security. While many employers (correctly) believe that their employees find such benefits important, a considerably lower proportion of employers actually offer them.