Twenty-three percent of U.S. employees surveyed by Willis Towers
Watson say they will have to work past age 70 to live comfortably in
retirement.
Nearly one-third (32%) anticipate retiring later than
previously planned, and another 5% don’t think they’ll ever be able to
retire. According to the survey, while the average U.S. employee expects
to retire at age 65, they admit there is a 50% chance of working to age
70.
Nearly eight in 10 workers indicate they will rely on their
employer-sponsored retirement plan(s) as the primary vehicle they use to
save for retirement. According to the survey, more than six in 10 (62%)
respondents would be willing to pay more out of their paychecks for
more generous retirement benefits; 63% would be willing to pay more for a
certain benefit at the point of retirement.
“Employers should
take this opportunity to personalize their real-time decision-making
support and recalibrate default enrollment to close the gaps in employee
understanding about savings amount required and costs in retirement,”
says Shane Bartling, senior retirement consultant at Willis Towers
Watson.
Many employees who expect to work longer may not be able
to due to stress or health issues. Forty percent of employees expecting
to retire after age 70 have high or above average stress levels,
compared with 30% of those expecting to retire at 65. For those planning
to retire after age 70, less than half (47%) say they are in very good
health, while nearly two-thirds (63%) of those retiring at age 65 state
they are in very good health.
The survey also found 40% of
employees planning to work past 70 feel they are stuck in their jobs,
compared with just one- quarter of those who expect to retire at 65
(28%) or before 65 (27%).
Twenty-four percent of employees
younger than 30 believe they’ll retire in their 70s or later, increasing
to 28% of those in their 30s and one-third (33%) of those in their 40s.
The percentage of U.S. men age 65 or older who are working has grown
from 15% in 2003 to 22% last year.
The Willis Towers Watson 2015 Global Benefits Attitudes Survey measured
attitudes of more than 30,000 nongovernmental, private-sector employees
in 19 countries. A total of 5,083 workers from the U.S. participated in
the survey, which was conducted between June and August 2015.
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Anticipated Lawsuit Against DOL Fiduciary Rule Has Arrived
A coalition of national financial and business trade groups has filed a lawsuit to strike down the DOL’s new regulations that will
require most brokers and investment consultants to act as fiduciaries.
Plaintiffs in a new federal lawsuit targeting the Department
of Labor (DOL) are hoping to halt what they see as “over-reaching federal
regulations that will restrict hardworking Americans’ access to retirement advice
and planning services.”
The suit was filed this week in the U.S. District Court for the
Northern District of Texas by a small group of national financial and business
trade organizations including the U.S. Chamber of Commerce, Financial Services
Institute, Financial Services Roundtable, Greater Irving-Las Colinas’ Chamber
of Commerce, Insured Retirement Institute, Lake Houston Area Chamber of
Commerce, Lubbock Chamber of Commerce, Securities Industry and Financial
Markets Association, and the Texas Association of Business.
Their self-stated objective is to “challenge the Department
of Labor’s fiduciary rule for brokers and registered investment advisers
serving Americans with individual retirement accounts (IRAs) and 401(k) plans.”
Those who have followed the fiduciary rule debate as it has unfolded over the years
will be pretty familiar with the arguments presented against the Department
of Labor’s (DOL) landmark regulations.
In a joint statement, the CEOs of the co-plaintiffs explained their grievances: “Our organizations have a long,
well-documented record of support for the creation of a uniform best interest, or
fiduciary, standard of customer care for financial professionals providing
personalized investment advice to retail investors. The Department of Labor’s
new, 1,023-page rule, however, creates sweeping changes to existing regulations
that will make saving for retirement more difficult for the very same
hardworking American families and individuals it claims to protect.”
The text of the complaint goes on to argue that the rule
will “hinder many of our member firms’
ability to continue providing the level of holistic financial advice and
suitable investment options their clients are accustomed to.” Plaintiffs cite a series of by-now familiar potential unintended consequences of the ambitious
rulemaking, stressing in particular that advisers servicing small business
plans “will be left with no choice but to limit or stop servicing the
retirement plans … significantly reducing the retirement savings options
available to their millions of employees.”
It should be noted that there are many advisers and financial industry advocacy organizations arguing those who make predictions that a strengthened
fiduciary rule will lead to less financial guidance and investment education
for small-balance savers are missing the bigger picture.
In any case, the path ahead for the litigation will take some time to come
into focus, but given the years of momentum behind the rulemaking, it’s going
to be a tough fight to actually stall the DOL through a single district court
lawsuit. During a recent PLANADVISER webcast called to discuss the rulemaking, for
example, expert ERISA attorneys told advisers they should be planning to comply
fully with the new fiduciary rule by upcoming deadlines in 2017 and 2018. Even
if this lawsuit or any other is successful in the end, it’s not going to be a
fast process, and the rulemaking may require substantial changes to ingrained
business practices.
NEXT: More from the
text of the complaint
The lawsuit asserts claims under the Administrative
Procedure Act and the First Amendment to the United States Constitution,
challenging the rule itself and the related “prohibited transaction exemption” (PTE)
promulgated by DOL. Plaintiffs charge that DOL overstepped its authority and is
creating unwarranted burdens and liabilities for the advisory and brokerage
industries, “undermining the interests of retirement savers.” They suggest such work as redefining the role of investment advisers, if it has to be done, should be undertaken by the Securities and Exchange Commission (SEC).
Throughout the text of the lawsuit, plaintiffs suggest the recommendations covered by the DOL rule
“include many that have never been understood to entail fiduciary duties, such
as whether to purchase an investment product, or offering a simple comparison
between a firm’s own proprietary products.”
“Indeed, the rule makes it impossible to sell most
individual retirement investment products without being deemed a fiduciary,”
plaintiffs argue. “It also bars non-fiduciaries from engaging in a range of
ordinary and customary communications with clients, including communications
that explain their products and services.”
The suit also claims that the DOL’s approach to the
rulemaking is fundamentally flawed: “Because the Department lacks affirmative
authority to regulate financial services outside the context of employee
benefit plans, it has sought to promulgate this new regulatory regime through
its exemptive authority under ERISA. That is, the Department seeks to convert
its authority to lift regulatory burdens into a means to impose them, resulting
in the most sweeping change in retirement planning since the adoption of ERISA
itself. By doing so, the Department has disregarded the regulatory framework
established by Congress, exceeded its authority, and assumed for itself
regulatory power that is vested in the SEC in ways that will harm retirement
savers.”
According to plaintiffs, a result of this approach is that much
of the policing under the new fiduciary rule will actually have to come from the plaintiffs’ bar. “Because the department itself lacks
authority to enforce these new fiduciary standards of conduct, it requires that
the new [Best
Interest Contracts] expose financial services firms and insurance
institutions to liability in class action lawsuits. Another newly promulgated exemption,
the Principal Transactions exemption, requires these same contractual
obligations and liabilities.”