ERISA

Blurry on Retirement

08.30.2023

 

New data exemplifies the blurry feelings and ideas workers have about retirement, with about one third indicating that they are unlikely to ever actually retire, while about half of those in their 60s plan to return to work. Here are some of the latest trends for retirement plan sponsors to keep front and center.

 

Have To vs Want To

For some workers in their fifties and sixties, employment is an absolute must, while for others, employment is a continuing link to purpose and stimulation. Summarizing insights from a recent survey conducted by F&G Annuities & Life, Amanda Umpierrez reports:

 

Half of pre-retirees in the U.S. are considering delaying or coming out of retirement and 44% have already done so….Respondents to the survey, who included Americans ages 50 and older who own over $100,000 in financial products or savings, are saying they enjoy the “intellectual stimulation” they receive from working (50%)….Of those aged 60 to 69, 50% are considering either returning or have returned to the workforce.

 

“Amid inflation, changing workforce dynamics post-COVID, and overall generational shifts, Americans are rethinking retirement and extending their time working or, for some retirees, unretiring altogether,” said Chris Blunt, president & CEO of F&G. “While it’s understandable that those facing financial challenges would consider such steps, it’s interesting to see our survey findings underscore how much generations like Baby Boomers are reconsidering what retirement looks like and what’s important to them such as finding personal fulfillment and intellectual stimulation.”

 

Financial concerns are the driving consideration among the 64% of pre-retirees who are delaying retirement, with longevity risks, inflation and the desire for a larger safety net impacting decisions. Just under a third of pre-retirees attribute decisions to keep working to “loving their job” and desiring “intellectual stimulation” through work. Given the aging of our population, and the uncertainties of this decade to date, retirement experts are seeing increasing receptivity to the guaranteed lifetime income possibilities available through annuities. Based on the F&G survey, 401k Specialist notes: “36% of respondents working with a financial professional owned an annuity, relative to 14% of those who do not use a financial professional.”

 

Longer Lives Require New Approaches

Transamerica and the Massachusetts Institute of Technology (MIT) AgeLab

underscore the importance of connecting employees to financial advice and educational services, noting that since Americans are living longer, new approaches to wellbeing are essential:

 

“What our data shows, and what we are seeing in the marketplace across generations, is that the way we approach our lives and the way we work is changing. People want flexibility and choice in all parts of their life, both at work and home,” said Phil Eckman, president of Workplace Solutions at Transamerica….“Employees are eager to live their best lives. And employers have a powerful opportunity in this new world of work to establish values that focus on the whole person and invest in solutions that support employees’ mental, physical, and financial health.”

 

A new study from MIT Agelab and Transamerica, “Longevity as Opportunity – New Conversations on Work, Finance, and Well-Being,” is based on focus groups with 1,200 individuals, broken into three groups: young adults (ages 20 to 39), adults in midlife (ages 40 to 59), and older adults (ages 60 and up). Across all age groups, 92% of respondents saidsaving enough money to retire was very or somewhat important,” though given the challenges of doing so, “33% do not expect to retire at all, and…are prepared to continue working in later life.” 401k Specialist shares these additional findings:

 

Younger and midlife adults were likelier to rank saving for retirement as among their top three desired topics of financial information, at 24% and 34%, respectively. Twenty-six percent of midlifers said they would want to know how much money they need for retirement. 

 

Older adults…wanted information on making decisions around Social Security or Medicare (39%) and managing their retirement portfolio/mix of assets, funds, and bonds in their retirement accounts (23%)….

 

Younger adults were found to be more invested in their wellbeing, as 36% were likelier to spend over $100 on their wellbeing every month—significantly larger than any other age group. This group was also likelier to express interest in returning to school and finding passion in their work.Their top savings priorities included having sufficient funds for emergency savings (44%) and building wealth (34%). Saving for retirement ranked last for younger adults, at only 26% of respondents.

 

The experts at  Transamerica and MIT AgeLab suggest that an important way for financial professionals to help midlife workers, many of whom report struggling to juggle careers, parenting and caregiving for aging parents, is to act as “agenda setters,” by “helping them anticipate long-term care for themselves.”

 

Timely Considerations For Retirement Plan Sponsors

By providing employees with access to professional advice and educational tools, and leveraging automatic enrollment features, employers are diligently helping workers onto the path to a secure retirement. Although ultimately saving is an individual action, external challenges interfere, and plan sponsors recognize increased challenges, like “rises in cost-of-living, student loan debt, and low salaries” require increased effort.

Indeed, many employers are actively adapting new strategies to assist workers with financial plans.  Overall, as the Society for Human Resource Management puts it, “Being thoughtful about plan design can dramatically improve employees’ chances of accumulating wealth and achieving a secure retirement.”

 

While encouraging workers to save through company sponsored plans, it is imperative for plan sponsors to tune into their own protections. With litigation and regulatory actions on the rise, no plan sponsor wants to personally pay for an ERISA defense attorney at the cost of $600—per hour.  At Colonial, a whole year of Fiduciary Liability coverage is less than a few dollars a day, and we even include Cyber Liability coverage to protect the business and retirement plan in the event of a cyber breach. When it comes to ERISA, it’s best to be proactive: choose your affordable plan sponsor protection package here in minutes.

 

Armed with Colonial’s liability coverage, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be protected with defense costs and penalty limits up to $1,000,000. Uniquely, Colonial even includes Cyber Liability Insurance (for the plan and the business), locks in multi-year rates and offers installation payments. Conveniently, our Fiduciary With Cyber liability package is now available with a one year commitment. Protect yourself and your business, for a few dollars a day, now:

 

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Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.