Business Owners: Are Your Employees Retirement Ready?
The retirement plan industry has been using the phrase “Retirement Ready” for a while now, but what does it mean? The definition of Retirement Readiness from Investopedia reads:
Retirement Readiness is the state and/or degree of being ready for retirement. Retirement readiness refers to being financially prepared for retirement, or the degree to which an individual is on target to meet his or her retirement-income goals so that the standard of living enjoyed while working will be maintained after retirement.
The media does a great job of adding enough confusion to the message that most people feel the retirement readiness question is too complex or they are too far behind to solve it. Recent studies have shown that as a country we are not saving enough. The 2018 Northwestern Mutual Planning and Progress study reinforces this:
- 21% of Americans have no retirement savings at all.
- 33% of baby boomers have less than $25,000 in retirement savings.
- 75% of Americans believe it is “not at all likely” (24%) or only “somewhat likely” (51%) that Social Security will be available when they retire.
- 46% of adults have not taken any steps to prepare for the likelihood that they could outlive their savings.
What does this mean to us as employers? Employees who are retirement ready are less stressed about money and more productive at work. Employees are more loyal to employers. If the idea of employee happiness does not motivate you then here is a business case for why this should be important to you as an employer.
What are the costs to your business when your employees are not financially prepared for retirement? A recent Mass Mutual Viability study demonstrates:
- Financially Stressed Employees: 54% of employees are stressed about their financial situation, which lead to a loss in productivity. The study states that on average these employees spend 13 hours per month worrying about money while they are at work. This equates to an average of $7,000 in lost productivity cost per year for each financially stressed employee.
- Cost of Delayed Retirement: 50% of workers age 60 or older plan to work at least until age 70. Older employees typically have higher overall labor costs due to higher wages, health care and overall benefit costs. The additional costs can be up to 20-50% higher per employee staying past typical retirement age of 65.
- Lack of Advancement Opportunities: If employees are working longer it reduces advancement opportunities for younger employees. This can create turnover and loss of talent and you risk losing your pipeline of future company leaders.
I am not suggesting forced retirement. The benefits of having more experienced employees in your workforce are many. What I am advocating is that successful employers help employees prepare for their financial futures and provide tools for retirement readiness. Your employees will be more engaged, and when the time is right the choice will be in their hands to retire or not to retire.
As a provider of company retirement plan solutions, we work hard to educate employers on why their retirement plan is so much more than just a tool to reduce their current year tax bill. I am passionate about showing employers how getting their employees retirement ready has many benefits for both their employees and their business.
If you have questions or would like to learn more about helping your employees be retirement ready, contact Chad Halbur at firstname.lastname@example.org.