Targeted Retirement Plan Communications Can Improve the Participant Experience

Targeted Retirement Plan Communications Can Improve the Participant Experience

As the workforce becomes more diverse and technologically savvy, retirement plan sponsors should focus on providing customized education, retirement readiness tools, situational guidance, and “next best step” trigger events to help employees prepare more effectively for retirement, a recent report by Broadridge Financial Solutions has recommended.

Released on June 7, the report, “Transforming the Participant Experience: Innovative Strategies for Improving Outcomes,” observed that converging trends—such as changing workplace demographics, technological innovations, evolving participant demands, increasing margin pressure, low savings rates, and added regulatory scrutiny—are creating challenges and opportunities for new solutions to improve participant experience. Pointing out that millennials are expected to make up more than 50% of the global workforce by 2020, researchers warned that plan providers should be prepared to cater to an increasingly diverse audience, many of whom are “digital natives.”

According to the report, growing numbers of plan sponsors are seeking to transform their participant engagement strategies by leveraging data analytics, participant preferences, and multimedia campaigns to create targeted communications. The authors noted that sponsors are increasingly moving away from legacy platforms that rely heavily on custom coding to modify campaigns and compliance communications, and are instead turning to cloud-based technologies that allow managers to streamline content and easily make changes across multiple communication channels, including digital, mobile, and print.

The report cited research showing, for example, that retirement plan participation can be raised 30% by effectively delivering personalized communication through multiple channels; and that an omni-channel approach of digital, print, and personalization strategies can save between 10% and 20% in annual communication costs.

In addition, the report recommended simplifying print materials to ensure that communications are focused on key points, and using online microsites and opt-out programs aimed at retirement plan participants to reduce the need for call center support.

Another important trend identified in the report is the increasing frequency of plan and regulatory changes, which put pressure on plan sponsors to respond quickly to new requirements and plan updates. The authors suggested that automated content solutions can help eliminate the need to constantly create and manage one-off changes, making it possible to issue targeted communications with speed and precision.

Noting that 45% of working American households have no retirement assets at all, and that the retirement savings gap in the U.S. is an estimated $7 trillion, the authors further advised plan sponsors to place greater emphasis on reducing the retirement savings gap. To address the challenges associated with employees who decline to participate in retirement plans and older employees who may be thinking of putting off retirement, researchers recommended developing programs that outline the options for and the drawdown phases of retirement.

From Benefit Trends Newsletter, Volume 60, Issue 8

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

Americans Seek Freedom from Financial Worries in Retirement

Americans Seek Freedom from Financial Worries in Retirement

 

Older workers preparing to transition to retirement are focused on more than just the amount of their retirement savings—they want to achieve the freedom from financial concern that will allow them to spend time with loved ones and have experiences that provide meaning and purpose, a survey commissioned by financial services provider TIAA revealed.

The survey of 1,000 Americans ages 55-68 planning to retire in the next five years was conducted March 14-20, 2017. As well as investigating how near-retirees expect to finance their life in retirement, the survey looked at where these older Americans intend to live and travel in retirement, and how they expect to spend their time.

When asked what considerations are important to their definition of success in retirement, most of the near-retirees surveyed cited freedom from financial concern (95%); the flexibility to do what they want, when they want (96%); spending time with family and friends (93%); relaxing (92%); and having the time to travel (80%).

However, a majority of the older workers polled reported that they have changed their original retirement plans: while 37% of respondents said they expect to retire at the age they had planned 10 years ago, another 37% said they now anticipate retiring later, and 24% said they expect to retire earlier than originally planned.

The survey results also suggested that a large share of near-retirees have not fully prepared for retirement, with just 43% of respondents reporting that they have met with a financial advisor or that they have calculated how much money they will need annually in retirement. Of those respondents, 54% indicated that they feel extremely or very prepared for retirement, compared to 34% of those who said they have not met with an advisor.

Although some of the respondents expressed anxiety about their readiness for the future as they get closer to retirement, 43% said they feel extremely or very prepared for the transition to retirement, and another 46% indicated they feel somewhat prepared for retirement. Researchers pointed out that even though more than half (55%) of the near-retirees surveyed said they feel prepared to manage their income in retirement, only 21% said they anticipate their savings will last for their lifetime. The survey also showed that 65% of respondents who plan to rely on income from an annuity said they feel prepared to manage their income in retirement, compared to 54% of respondents who intend to draw down savings from a defined contribution retirement plan. However, just 17% of respondents reported having purchased an annuity as part of their retirement preparations.

The survey results further revealed that not all near-retirees plan to stop working after reaching retirement age: 31% of the men and 22% of the women polled said they have investigated part-time or consulting work, while 19% said they have considered volunteering.

In addition, the survey found that large shares of respondents plan to move in retirement. While roughly the same shares of male (40%) and female respondents (38%) said they expect to move out of their current home, they differed on where they would like to go: 61% of the men but only 49% of the women said they plan to downsize to a smaller home; and 24% of the women but just 10% of the men said they would like to move closer to family and friends.

From Benefit Trends Newsletter, Volume 60, Issue 6

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

How Companies Can Assist Employees in Transitioning To Retirement

How Companies Can Assist Employees in Transitioning To Retirement

As older workers are preparing for retirement, employers can help them make this sometimes challenging transition smoother by encouraging these employees to think about the steps they can take to create value and improve their well-being before and during retirement, according to an article that appeared in the April 2017 issue of Workspan, a magazine published by HR association WorldatWork.

The article, “How to Help Employees Ease into Retirement,” was written by Lori Block and Alan Vorchheimer of Conduent HR Services. The authors observed that given the extended lifespan of the average retiree, people who are preparing to leave the workforce have to consider the possibility that their retirement could last 20-30 years. Thus, they pointed out, prospective retirees will have to adjust to a number of new realities in order to live “well” during this final, and often extended phase of life.

In their article, Block and Vorchheimer referred to research done by the Gallup organization that identified “five pillars,” or elements of well-being that are essential to most people: namely, career, social, financial, physical, and community well-being. Increasingly, they said, HR professionals are recognizing that the workplace can be the foundation these pillars are built upon, providing people with the tools they need to perform well and feel good throughout their lives.

The authors advised companies looking to boost the professional well-being of their workers nearing retirement to offer these employees access to options like phased retirement, which can help both the employer and the employee gradually adjust to the individual’s departure. They also recommended that employers promote social well-being in the workplace through initiatives like multi-generational “reverse mentoring,” in which younger employees help their co-workers who are closer to retirement understand new technology and industry trends.

In addition, Block and Vorchheimer noted, employers can improve the financial well-being of older employees by offering them access to third-party vendors, voluntary benefits, and other programs they can carry into retirement. Finally, the authors advised employers to promote community well-being by, for example, giving mid-career employees and retirees assistance in transitioning from their current job to a position in a nonprofit organization that would benefit from their skills and experience.

Block and Vorchheimer stressed that applying this five-pillar approach to helping employees transition to retirement can enable employers to live up to their values and honor their commitments to their workers, while also resolving some practical issues. “On a practical level,” they argued, “it enables better workforce management and movement, breaking up possible career bottlenecks for newer employees while retaining and transferring critical knowledge from outgoing senior and experienced people.”

From Benefit Trends Newsletter, Volume 60, Issue 6

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.

Workers Who Feel Stressed About Retirement Are Failing to Take Action

Workers Who Feel Stressed About Retirement Are Failing to Take Action

Many American workers who report feeling stressed about retirement admit they are not taking the steps necessary to prepare for their financial future, the results of an annual survey conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates indicated.

The 2017 Retirement Confidence Survey (RCS) was conducted January 6-13 with 1,671 U.S. residents (1,082 workers and 589 retirees) aged 25 and older. The results showed that 31% of workers feel mentally or emotionally stressed about preparing for retirement, and that 30% worry about their personal finances while at work. Of these respondents, half said they think they would be more productive at work if they did not spend time worrying.

When asked whether they believe that having access to programs at work that help them plan for their financial future would be helpful in increasing their productivity, around half of all of the workers surveyed said they believe they would benefit from participating in retirement planning (52%), financial planning (49%), or health care planning (47%) programs.

The results also showed, however, that many workers are not yet taking critical retirement planning steps. While 61% of the workers surveyed said they have saved for retirement, just 41% indicated that they have tried to figure out how much money they will need in retirement, 38% said they have estimated how much income they would need each month in retirement, another 38% reported that they have estimated the amount of their Social Security benefit, and 34% indicated that they have estimated their expenses in retirement. In addition, just 23% of the workers surveyed said they have spoken with a professional advisor about retirement planning, and only 11% reported that they have prepared a formal plan for retirement.

In line with earlier waves of the survey, the 2017 wave indicated that far more retirees than workers feel confident that they will be able to afford a comfortable retirement. Almost 80% of the retirees surveyed said they feel confident about having enough money to live comfortably throughout their retirement years, including 32% who said they feel very confident.

The results also showed that workers who believe their debt is a major problem have notably lower levels of retirement confidence: 32% of these workers said they are confident about retirement, compared with 78% of workers who indicated that debt is not a problem for them. Moreover, the workers who said they have a retirement plan appear to have markedly higher confidence than those who did not: 33% of those who lack a retirement plan said they are confident about retirement, compared with 71% of those who have a plan.

Of the workers who reported that they are not currently saving for retirement, 73% said they would be at least somewhat likely to save for retirement if their contributions were matched by their employer, and approximately two-thirds said they would be likely to save for retirement if automatic paycheck deductions of either 3% or 6% of salary were used by their employer.

The findings further indicated that workers are far less confident than retirees about being able to afford health care in retirement: 54% of workers said they are confident about being able to afford medical expenses in retirement, compared to 77% of retirees.

From Benefit Trends Newsletter, Volume 60, Issue 4

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

Cognitive Aging Could Affect the Ability to Delay Retirement

Cognitive Aging Could Affect the Ability to Delay Retirement

Working longer has been suggested as an effective way to boost Americans’ retirement security, but setting a higher standard retirement age overlooks the problem that a minority of workers may experience levels of not just physical, but cognitive decline that could negatively affect their job performance, a study published in November 2016 by the Center for Retirement Research at Boston College warned.

The study, “Cognitive Aging and the Ability to Work,” was written by economists Anek Belbase and Geoffrey T. Sanzenbacher. The authors cited previous research showing that as workers age, they tend to experience a decline in “fluid” intelligence, or the capacity to process new information. It has also been shown, however, that most older workers are able to maintain their productivity despite this loss of fluid intelligence because their “crystallized” intelligence, or their accumulated knowledge, tends to increase; and because their cognitive reserves continue to exceed the demands of the job.

The researchers explained that as workers grow older and more experienced in their job, their crystallized intelligence offsets declines in fluid intelligence because the amount of information they need to learn decreases, and the steady accumulation of knowledge over time makes up for their loss of fluid capacity. Moreover, workers who perform simple or routine tasks may have more fluid intelligence than their job demands. For example, the authors said, many clerical positions require workers to perform routine activities that become automatic with time, leaving such workers with enough fluid capacity in reserve to act as a buffer against decline.

However, Belbase and Sanzenbacher noted that certain types of workers may struggle to maintain their productivity as they age, including those in high-skilled occupations with an intense demand for fluid intelligence, those who switch jobs later in life and therefore lack the crystallized intelligence needed to compensate for a loss of fluid intelligence, and those who experience unusually severe levels of cognitive decline.

To demonstrate the interplay of crystallized and fluid intelligence, the researchers cited a study of the performance of air traffic controllers that asked participants to re-route two planes on a collision course. The results showed that older controllers performed substantially worse than younger controllers, and no better than younger study participants with no training in air traffic control. In light of such evidence, the researchers noted, air traffic controllers are required to retire by age 56.

The authors also pointed to previous research showing that while the risk of dementia remains low among people in their fifties and early sixties, at about 4%; this risk rises to 15% among people aged 65-74. They also observed many individuals who develop severe dementia in their seventies start to exhibit significant symptoms while in their sixties.

Based on these findings, Belbase and Sanzenbacher recommended that as the retirement age rises, employers have screening programs in place to identify older workers who are suffering from cognitive decline—especially if these workers are performing tasks that have high cognitive demands or in which errors could significantly harm others. “Screening could protect the public from harm and potentially allow the cognitively impaired to qualify for retirement under the disability program,” the authors said.

From Benefit Trends Newsletter, Volume 60, Issue 3

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

Employers Plan To Do More to Boost Employee Retirement Savings

Employers Plan To Do More to Boost Employee Retirement Savings

Most sponsors of 401(k) plans report that they are dissatisfied with their workers’ current retirement savings rates, and plan to use a number of initiatives to increase savings rates and improve their employees’ financial well-being, the results of a recent survey conducted by human resources consultancy Aon Hewitt indicated.

The survey asked more than 250 U.S. employers (representing nearly nine million workers) about their retirement benefit priorities, and about the changes they are likely to make to their retirement plans. The results, which were released on January 15, showed that just 15% of the retirement plan sponsors surveyed are satisfied with their workers’ current retirement savings rates, and that nearly all of the employers (90%) surveyed are concerned about their workers’ level of understanding about how much they need to save to achieve adequate retirement savings. The findings also indicated, however, that nearly all of the employers (87%) who said they are not satisfied with their employees’ savings rates are likely to take action this year to help workers make plans to reach their retirement goals.

The results further suggested that employers are increasingly taking an interest in the issue of financial wellbeing: 60% of respondents said they believe that this issue has grown in importance over the past two years. The survey also showed that 92% of respondents intend to focus on the financial well-being of workers in ways that extend beyond planning for retirement, such as helping workers better manage their student loan debts, their day-to-day budgeting, and even their physical and emotional wellbeing. Moreover, the results indicated that 58% of respondents currently have a tool available that covers at least one aspect of financial wellbeing, and that 84% expect to offer such a tool by the end of the year.

Researchers also observed that employers are taking the lessons learned from automatic enrollment and enhanc-ing their automatic features to boost savings rates, citing a separate 2015 report that showed that more than half of all plans with automatic enrollment default workers at or above the company match threshold. The report further indicated that employers are adding contribution escalation features and enrolling—or “backsweeping”—workers who were not previously enrolled in the 401(k) plan.

From Benefit Trends Newsletter, Volume 60, Issue 2

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.