New Principal Study Finds Alarming Concerns for Workers Nearing Retirement

COVID has done nothing to quell employers’ concerns about their employees’ financial wellness and readiness to retire, according to the most recent Principal Retirement Security Survey??¹.

Despite 75 percent of employers offering retirement planning resources, half of employers believe their employees are not prepared to retire. 

This is corroborated by Insured Retirement Institute² and United Income³ surveys which found that:

• 20 percent of those over 65 are still working
• The number of seniors working past 65 is projected to grow
• 60 percent of seniors plan to work past 65
• 25 percent of seniors plan to work until at least 70

The impact of late retirement can be substantial for employers who shoulder the cost of delayed retirement.

Between lowered productivity and higher costs, one study4 estimates that a one-year delay in retirement costs employers $50,000 per employee per year. If the retirement delay is greater than two years, the costs get even higher.

What Are the Specific Concerns?

The Principal survey didn’t just uncover employers’ general concern over retirement readiness. It also brought to light the specific areas of concern by asking how well employees are doing with the following retirement income planning actions:

• Reviewing estimated Social Security benefits: 46 percent poor/fair
• Meeting with a financial professional regarding retirement savings and income planning: 50 percent poor/fair
• Calculating how much they need to save before they retire comfortably: 52 percent poor/fair
• Reviewing expected health care costs in retirement: 69 percent poor/fair
• Determining a target age for retirement: 40 percent poor/fair
• Creating a formal retirement income plan: 68 percent poor/fair
• Researching different ways to create a retirement income from their savings (i.e., systematic withdrawal strategies, bucket strategies): 70 percent poor/fair
• Determining how to manage multiple retirement accounts (i.e., DC plan, other employer-sponsored retirement benefits, IRAs, HSAs, if applicable): 65 percent poor/fair
• Determining if they will have enough income in retirement from guaranteed sources (i.e., Social Security, pensions, annuities) to cover essential expenses: 57 percent poor/fair

Based on these retirement readiness indicators, over half of employees are not participating in behaviors that will help them retire comfortably.

How Can Financial Wellness Benefits Help?

Employees know they need to save for retirement. However, knowing that they need to save and knowing how to save are two different things. 

• Two-thirds of employees will not have enough saved to retire comfortably5
• Employees need to save 16 percent of their annual pay beginning at age 25 but typically save just 5 percent
• 20 percent of employees have no idea if they are on track with their retirement savings6

To achieve retirement readiness, employees need to understand the financial concepts surrounding retirement, learn skills to improve retirement readiness, and develop financial habits that increase financial health. That’s where financial wellness benefits come in.

Enrich’s Planning for Retirement Course and Retirement Analyzer Tool

At Enrich, we understand that one key indicator of financial wellness is retirement readiness, which is why we offer several resources to help employees plan for retirement. 

Our “Planning for Retirement” course can help employees understand:

• Different kinds of retirement accounts
• Tax implications of retirement accounts
• Retirement myths and pitfalls
• Why saving sooner makes sense
• Social security benefits and limitations

Enrich users also gain access to the Retirement Analyzer Tool that can help employees visualize the gap between their savings and retirement goals and provide solutions to help them overcome this gap. 

The Enrich Financial Wellness Program is a holistic financial wellness benefit that provides employees with answers to their retirement questions and action steps to lead them toward retirement readiness, thus reducing their financial stress and providing them with peace of mind. 

1 - https://secure02.principal.com/publicvsupply/GetFile?fm=PQ13007A&ty=VOP&EXT=.VOP 

2 - https://www.myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2016.pdf

3 - https://unitedincome.com/library/older-americans-in-the-workforce/

4 - https://www.prudential.com/corporate-insights/employers-should-care-cost-delayed-retirements

5 - http://www.aon.com/retirement-readiness-savings-income-adequacy-the-real-deal/index.html?promo_name=HP-01-2018-10-09-realdeal2018&promo_position=HP-01

6 - https://www.bankrate.com/surveys/financial-security-poll-november-2019/