Sixty-nine percent of employees admit they aren’t putting enough money away for retirement. And since the pandemic, many workers who were planning to retire at ages 65 to 67 now say they can’t retire until age 70 or … never!
These are the latest finding of the Global Benefits Attitudes Survey by Willis Towers Watson (WTW) which surveyed more than 9,600 employees between December 2021 and January 2022.
Pandemic impacted retirement savings
It’s hard to find one aspect of our world that hasn’t been affected by the pandemic. Unfortunately, workers’ retirement savings didn’t escape the pandemic’s devastation either. The top 3 reasons given by the respondents as to why they couldn’t save more for retirement were:
- paying off debts (36%)
- saving money for other reasons – holidays, purchasing a car or paying for education – (28%), and
- not being able to afford to save more (27%).
And more than half of the respondents (52%) are facing key risks to their retirement security, like putting away less than 5% of their salaries and borrowing from their 401(k). Any financial advisor will tell you that borrowing from your 401(k) is not the way to get out of debt or pay off their own or a child’s student loans.
“Saving enough money to retire comfortably while meeting current financial needs remains a significant challenge for a majority of workers,” said Mark Smrecek, senior director, Retirement, WTW. “At the same time, workers, and especially older ones, are asking themselves when they will be able to retire. With the pandemic and current economic uncertainty with inflation, how workers are transitioning to retirement is changing.”
Only 25% of younger workers have any plan to retire at age 70, later or never. This may be a good work population for Benefits pros to target with the importance of saving for retirement. Show them the difference between starting to save for retirement at age 23 as opposed to 33. And when they say, “I can’t afford to save anything right now” demonstrate to them how much they can save by not buying fancy coffees every day.
As for workers over 50 who plan to delay retirement until later or never, that number in 2019 was 30%, now it’s 36%. Benefits pros can also help hook them up with financial advisors as to how they can continue their original plan to retire at 65 or 67. True it may be good for firms to keep these seasoned professionals longer, but you want your employees to be happy mentally and physically. If they aren’t already, you can sweeten the deal by offering them full-time remote work, if they don’t do it already, or more flex time to spend time with family.
Employer retirement plans employees’ only savings
Not surprisingly, 73% of workers only have their employer’s retirement plan as their sole means of saving for retirement. And most (69%) are happy with their employer’s retirement plan, saying it meets their needs. But take that with a grain of salt, because 44% of employees – all ages – rank retirement in the top three issues they want their companies to focus on.
“Employees want help with saving for retirement. So, it’s imperative for employers to ensure their Total Rewards programs provide not only benefits that meet employees’ needs but also the employee engagement resources, tools and technology to make informed decisions about saving for retirement,” said Jennifer DeMeo, managing director, Integrated & Global Solutions, WTW. “When their financial well-being is strong, employees are more likely to be engaged and productive and less likely to leave their organization.”