American workers are less confident than ever that they’ll be able to save enough to retire comfortably, according to a new study by theResearch Institute (EBRI).
Benefits professionals, take note: The finding means you have lots of work ahead of you to help employees meet their retirement goals.
The good news: A growing arsenal of online tools can make it easier for employees to take control of their retirement planning. Working with your benefits broker and retirement plan administrator, you can provide resources that will help employees save more.
That might help reverse a crisis of confidence that has left many employees afraid they’ll never be able to retire at all.
Not ready to retire
Only 13% of employees that EBRI surveyed said they are “very confident” they will have enough money to retire on. That’s the lowest percentage the research-focused organization has found in 21 years of measuring retirement confidence.
Twenty-seven percent of employees said they are “not at all” confident of amassing sufficient retirement funds—the highest figure EBRI has ever reported.
What’s Plan B for these workers? They assume they will have to wait longer to retire. Thirty-six percent of those polled said they plan to continue working after age 65.
That’s a marked change in just a few years. In 1991, only 11% felt they would need to continue working after the traditional retirement age. Most of those who do plan to retire on time—74%—expect to continue to work at least part time to help pay the bills.
Help employees take control
Experts say one of the keys to getting retirement plan holdouts to participate (and boosting savings among those who do) is making it easy for employees to exercise control over their investments. These four online services do just that.
1. Take-home pay calculator: This simple web widget helps employees find out how much it will cost them to start contributing or increase their contributions. Knowing how little retirement contributions cost in terms of take-home pay makes it easier to commit to saving. Take-home pay calculators help employees understand they can afford to invest.
2. Online contribution changes: This lets participants go online to change the amount they contribute. If employees can handle this themselves, they’re likely to save more. Bonus: They won’t be bugging you for forms every time they want to make a change.
3. Automatic contribution increases: An auto-increase function lets participants activate an increase—maybe 1%—at set intervals. Yearly increases are most common, but most auto-increase systems let employees pick the interval. Result: no more forgetting to increase retirement contributions following a pay raise or bonus period. Note: Auto-increases must include an override function that lets employees opt out if they choose.
4. Portfolio return calculations: This service allows current plan participants to gain a fuller understanding of their risk/reward tradeoffs. Given a set portfolio of investments, what will returns look like at age 60? How about 65, 70 or 75? That’s useful information for people who wonder if their investment mix will help them achieve their retirement goals.
Advice: Lean on your 401(k) or 403(b) plan provider to offer as many of these online services as possible. They all exist in one form or another throughout the retirement investment realm on the web.
Knowledge is power. The insights these tools provide might be just what it takes to help your employees stop feeling powerless about their ability to take control of their retirement destinies.
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