Timing, it is said, is everything. And the timing of an employee’s retirement, which seems to be a discrete and simple matter, actually is a more delicate dance than one may imagine for future retiree and employer alike.
In an April 30 presentation at the Plan Sponsor Council of America’s (PSCA) 2019 annual conference, Patti Vogt Rowey, Vice President of the Transamerica Institute and the Transamerica Center for Retirement Studies, and Marc Howell, Vice President, Custom Retirement Solutions at Prudential Financial, offered their perspectives on a process that has importance and implications beyond when the going-away party will be held and the retirement benefit payments begin.
Rowey discussed a Transamerica survey of 2,000 retirees who are self-financing their retirements. The median age of this group was 63. But that doesn’t mean that they retired when they had planned to. A majority — 56% — said that they retired sooner than they had planned. Nearly half — 46% — stopped working immediately as soon as they retired, but 19% phased into it.
And retiring when they did — and for a majority of them, earlier than they had planned — should not be taken to mean that they thought they were ready to take that step. A mere 18% said that they were “very confident” that they could retire into a lifestyle that they would find comfortable. That means that a whopping 82% were not that confident. And for good reason — Rowey reported that their median annual income was $32,000.
Transamerica also surveyed current employees. Their expectations are not nearly as rosy as those of their near predecessors. Only 22% expect to stop working immediately when they retire — less half the percentage of the retirees. Only 7% of the retirees said they are doing paid work after retiring, but 55% of the current employees plan to work when the are retired.
And, Rowey said, not only did a majority of the retirees they studied retire earlier than they planned to a life they expected would not measure up to what they had envisioned. Just over two-thirds of them reported that their employers did nothing to help them in their transition to retirement.
Some employees, Rowey said, plan to address the problem of when to retire by delaying it, or even simply not doing it. She said that Transamerica found that 54% of the current employees they surveyed planned to retire after age 65 or not retire at all.
Employers, too
Employees are not the only party concerned with timing of retirement — so are employers, Howell told attendees, but in different ways. “Delayed retirement can hurt workers and the organization if unplanned,” he said.
Financial concerns are a major reason why employees delay retirement; Howell said that 65% of employees are distracted by them at work. And that hurts not just employees — it also costs employers; for example, through lost productivity.
How to Help
Howell outlined some ways in which employers can help alleviate employee stress, and perhaps in the process change the timing of their retirement.
In order to accelerate retirement patterns, Howell said, it is necessary for an employer to understand what drives an employee’s decision regarding when to retire. “It’s largely emotional,” he said.
Howell suggested that helping employees to build emergency savings would help reduce their stress over finances, which is a factor in delaying retirement. He added that student loan assistance can help as well — financially, but also as a way to reduce stress and the health issues and lost productivity that can result from it.
Howell noted that Prudential found that 69% of employees in a case study planned to work past age 67 when there was a standard retirement program; however, when there was an “optimized” retirement program that included such assistance, only 40% planned to work beyond age 67. And that affected the bottom line — that employer saved $2 million overall by augmenting its retirement plan.
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