The “2013 Workplace Benefits Report” found more needs to be done to help employees confidently transition into retirement. One out of four preretirees who indicate being within five years of retirement-expect to have less than $250,000 saved. Employees are looking to their employers for access to one-on-one advice from a financial professional.
Two-thirds (66%) of employees have increased their focus on retirement goals within the last five years. However, 85% feel they are not saving enough and 60% believe it will be difficult to ever save enough to support their standard of living during retirement.
This lack of confidence may be one of the reasons why 78% see themselves working into their late 60s or 70s, said the report, up from 72% one year ago. Another reason cited was employees in later stages of their careers often find themselves on their own when it comes to transitioning into retirement. Only 34% of employees felt their employer provided sufficient advice to help with this transition.
When it comes to preparing for long-term financial security, the importance of workplace retirement savings plans is not lost on employees. The report indicated 71% believe their retirement plan will be their largest or second-largest source of retirement income, followed by Social Security (43%) and other savings and investments (38%).
The report offers several recommendations for how employers can empower their employees in the areas of financial wellness and retirement readiness.
One way is for employers to offer individualized advice and guidance Steve Ulian, managing director, institutional retirement and benefit services for Bank of America Merrill Lynch, told PLANSPONSOR. "There are tools available that give general guidance, but we've found that the next step is to base such guidance on the participant's own situation so as to provide them with recommendations for their specific needs. When people get specific recommendations like this, research has shown that their financial wellness improves."
The report found 51% of employees said the resources and tools they would most like their employer to provide to help them obtain financial advice was access to a one-on-one meeting with a financial professional. This was followed by online tools (46%), financial seminars relevant to their life stage and personal situation (39%) and relevant research or literature to help them make investment decisions (38%).
However, Ulian said employers should not overly rely on technology as a delivery system for information about financial wellness and retirement planning. "These days, it's not necessarily about everyone using technology applications, such as websites, to participate in the retirement planning process. The days are back where people want to talk to actual retirement professionals, to sit down and really understand the material in front of them."
Employers are also encouraged to "go beyond retirement," treating it as one element in a larger process of saving skills for the long term.
"Five to seven years ago, plan providers didn't often have a conversation with plan sponsors that covered the holistic financial wellness of their participants," Ulian said. "Now, there has been a demonstrated shift in the importance of this topic. 'Go beyond retirement' means covering a range of financial skills such as budgeting and handling debt, not just saving for retirement. It's really the plan sponsor delivering the full range of financial education to their employees."
The report reflected this holistic outlook in that 59% of employees said the financial matters they need the most help with include advice and guidance around saving for retirement, followed by managing debt, budgeting and planning for health care costs. Fifty-eight percent of employees sought advice across all aspects of their financial life-including two-thirds of female employees (66%) and half of male employees (49%).
Redesigning employer matching contributions is also recommended. Ulian explained, "It has to do with behavioral finance. To help people understand what they need to do. And perhaps to encourage participants to contribute more to retirement themselves. It's using plan design to drive better behavior."
One other recommendation is to integrate retirement plan enrollment with annual health care enrollment. "People only take action when they have to," Ulian said. "We know that everyone has to enroll in health care options, so doing retirement plan enrollment at the same time helps because employees are already engaged. It drives enrollment and focuses the attention of the participants on enrolling that might not happen otherwise."
On behalf of Bank of America Merrill Lynch, Boston Research Group conducted the survey of more than 1,000 employees from companies of all sizes between March 6 and 17, 2013. The survey was done online and respondents had to be enrolled in a 401(k) retirement plan.
The report can be found here.