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Employers Want To Do More To Help You Save For Retirement – Too Late‼️

Worried about your retirement? You’re not alone. So, increasingly, is your employer. A new survey says America’s bosses are growing more concerned over their workers’ financial well-being and preparations for retirement. The only question now: What took them so long? 

According to a survey of more than 300 U.S. employers by Willis Towers Watson , more companies say they will try to help their employees by focusing increasingly on retirement readiness and benefit adequacy. The results, based on a survey conducted in February and March of 2016, show 39% of firms that offer a defined benefit and defined contribution plan see their employees’ retirement readiness as a current risk. And more, or 44%, consider it a risk two years from now, according to the survey.

Source: Employers Want To Do More To Help You Save For Retirement – Forbes

What took them so long indeed?  If I may brag a bit, I was providing these services and much more to employees over twenty-five years ago. We also ran a program for employees and spouses called “Thinking About Retirement” and let me tell you, when it came to understanding retirement, there wasn’t much thinking going on, especially when it came to planning for a spouse’s needs or more accurately a surviving spouse’s needs.

All those programs are long gone as is most of what I call concept communications where more than mere facts about retirement and other benefits are regularly communicated to workers. You can comply with the disclosure laws, but that does not mean you have communicated.

That's the last of it.

That’s the last of it.

Employers are traditionally short-sighted when it comes to this soft stuff, they focus on cost and liabilities on the books, but miss the impact on their workforce; employees who can’t afford to retire, or who are stressed with financial problems. You could easily argue these are not the employers problems, but when they affect the workforce and productivity on the job, and indirectly their consumers, they are the employers concern or should be.

Over the last several decades employers have, in the name of EPS, gradually changed the deal. They have modified or eliminated defined benefit pensions, many cut matching contributions to 401k plans during the recession and have yet to fully restore them. Nearly all large employers have eliminated retiree medical benefits or greatly increased the cost to retirees.

The long-term impacts of all this have been ignored… so now we hear employers are growing more concerned about workers financial well-being. Too late‼️ These employers better start looking into on-the-job senior services because a growing portion of their workforce will be at work with walkers and wanting dinner are 4:00. 

Many employers sawed off a good part of one leg of the three-legged stool of retirement income … and now they are concerned⁉️

You might also like to read this from almost two years ago.   Employers are helping to kill retirement (and our future economy)

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9 replies »

  1. The biggest problem I see, in planning for a spouse who may out live you, is people are not buying enough life insurance to replace working year income or pension income once a spouse dies. My $100,000 life insurance policy will provide more tax free benefit to my wife, than any waiting for the bigger social security check, by delaying SS benefits ever could. I just wish I would of purchased more when I was younger. We are lucky to live in a low cost of living area in MT.

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    • That’s is certainly one of the issues and one easily solved if started at a young age. I found in my fifty years working with people and there benefits that all too many men paid no attention to this matter and some felt their pension was all theirs and they had no obligation to provide survivor benefits.

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  2. Many union employee positions were covered under multiemployer plans. So, even if you did work for 30+ years, you were crapped on by management AND your union leadership through deliberate over committment and deliberate underfunding.

    See PBGC report: http://www.pbgc.gov/Documents/2015-annual-report.pdf where, on page 33, the PBGC discloses the unfunded liability estimate for multiemployer (union) plans to be $52+ Billion – an all time high!!!! In response, on page 9, Congress approved, and President Obama signed into law the Multiemployer Pension Reform Act of 2014. Under that new legislation, a plan can apply to the Treasury Department for approval to reduce VESTED, ACCRUED benefits to as little as 110% of the PBGC-guaranteed level!

    Fact is, just like public employer plans, pension promises without funding are mere dreams!

    The concept that all, or most, or a majority of private employers once devoted significant focus to workers’ retirement was, is and continues to be a myth! Those who argue such crap, that all, or most or a majority of employers once delivered on that promise but are now falling down on the job, are the same people (see Ghilarducci, et. al.). like the weenies who pushed for Health Reform, who believe in a federal government solution.

    How’s that health reform working for ya – as UHC and now Aetna announce desertion from the public exchanges. Many believe the next step is to formally move to a government only solution (which we may yet get with a new President Clinton). So, keep complaining about private sector retirement benefits (see state initiatives for private sector workers, now in place or under development in 31 states), and see how private sector plans evolve…. what is a minority of benefits could well disappear.

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  3. Over the several years I’ve been reading this blog, among the things you frequently talk about are:

    1. Private employers are not offering sufficient retirement plans.

    2. Public employers are offering retirement plans that are too generous compared to private employers.

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    • I talk about employers not offering pensions any longer, not that the ones who do offer skimpy plans. From my perspective the death of traditional pensions is a big mistake even recognizing half or more of private workers never had them. They are going because they are too costly to administer, there is too much volatility in funding and because of a changing workforce and less unionization.

      The public sector faces the same issues, but since taxpayers are footing the bill nobody seems to care. And yes, public plans in general are far more generous than private plans.

      We need to find a way, perhaps through 401k plans to provide a greater stream of income in the form of annuity. Perhaps have the employer match in a plan go toward annuity purchase of some kind. The employer costs would be fixed, the employee would still have lump sums and something greater than Social Security would be assured.

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  4. Again, what you say is true for a few employers, but not for the vast majority of private sector employers and employees.

    It is a myth that all private sector employers offered lucrative defined benefit plans in the past – plans that used 3 year final average pay formulas, included early retirement subsidies, were non-contributory, and included post-employment automatic cost of living adjustments. The percentage of private sector workers accruing benefits under a defined benefit pension plan has seldom exceeded 33%. However, it was that myth of widespread DB pensions that triggered exactly that result for public employers – where defined benefit pension plans apply to 90+% of workers. So, it seems odd that you are so surprised that, after paying excessive taxes to fund excessive benefits for public sector employees and other massive overspending by the federal government (and some states), that private sector employees are unable or unwilling to allocate sufficient assets to financially prepare for their own retirement.

    The median private sector employee has tenure of about 66 months, that is about 5.5 years, and that has been consistent for over the past 40 years (EBRI). So, when you comment that employers are only now becoming concerned, you have to keep in mind that, for the typical employer, only 10% of their workforce in place today will actually stay with them until retirement age. Instead, the median American private sector worker will have 6, 7, 8, 9, 10 or more employers. I have long argued that many, perhaps most private sector employers are not focused on retirement preparation, and those who are, are often focused on the wrong priorities.

    As an example of median tenure, I worked for one Fortune 100 firm for 25 years. However, during my working career, counting the US. Army service as a single employer, I had 10 other employers where I received W-2’s (not including other jobs working for relatives, delivering newspapers, etc.). And, I look forward to one or two more employers in my future.

    Just as important, retirement ain’t what it used to be. My parents and grandparents had a retirement where you worked all your life until you were physically spent, and you couldn’t work any longer. My dad died as an active employee firefighter. My mom became disabled as an active employee for the State of Ohio at age 64 and left the workforce. Both had modest pension plans. My mom lived 12 years in disability retirement – a totally sedentary lifestyle due to her disability, and died at age 76. So, in the past, it was much more typical for individuals to work all their lives, until they could work no longer, stop working, retire to a sedentary lifestyle, and die soon thereafter.

    What has changed, of course, is the idea of retirement. It was in the 1980’s and early 1990’s that we had a “golden age” of retirement – where those who had access to a quality defined benefit pension plan and a retirement savings plan (both) could fashion a retirement strategy that allowed them to maintain their pre-retirement standard of living throughout an extended period of retirement. There, we were talking about people who succeeded over 20 – 40 years in the workforce, retired in their late 50’s, and spent 20 – 40 years in retirement. Those individuals were always a minority, an exception. And, that golden age of retirement is long gone – with regard to today’s workers.

    Finally, remember that WillisTowersWatson surveys large or jumbo employers. They too, in terms of wages and benefits, form a minority, an exception, when you compare them to almost all other American private sector workers.

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    • Excellent points all, but I still think employers need to do more education for workers even if it is only for DC plans and how to use them in retirement.

      My perspective is a bit tainted even though I know the statistics. In my industry there was little turnover given 2/3 were union jobs and 30 plus years of service was the norm. I retired with 49 years.

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      • I think the education needs to start in high school. I do not expect a teenager to listen or care about retirement because it is so far away. But I think that a few weeks of personal finance should be taught in a math class. Topics like credit cards, mortgages, car loans, interest rate, differences between CD’s or stock funds, filing income tax forms and balancing your check book. By the time an employer offers information on a plan they might understand it or know enough to ask a good question instead of just opting out because they don’t understand it.

        A few decades ago, it took me a year and a half to enroll in my 401K because I didn’t understand it or the tax advantage at the time. I had a pension and I wasn’t sure that I could afford having extra money taken out of my pay check. It turns out that I was able to off set some of that money by not having it taxed. Once I understood that I was leaving money on the table and what tax deferred meant, I signed up.

        Back then there were whose people who had pension and those who did not. IRAs just started so there was no one who was retired to ask what they did and what they wish they would have done. To this day I do not trust financial advisers because most make their money by commissions buying and selling your stuff.

        Now I tell every young person I know, max out your company’s 401k match, if you can afford it, do a Roth IRA instead. Above the match do a mutual index funds because the chances are that long term capital gains taxes will be less then your retired income tax rate if you were successful in life. Be forewarned that some things can taken anyway during finical hardship or bankruptcy and other things cannot be taken away. And always assume that they will change the rules on you in 40 years.

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