How can employers assist baby boomers?
First, offer financial planning services and education so employees can estimate how much they need to retire and save accordingly. Planning must be personalized and include a range of scenarios that contemplates a reduction in Medicare benefits and a realistic return on investments. Remember, the return on the S&P 500 has been roughly zero over the last decade and turns negative when you account for inflation. Second, review your company’s benefit plans and investment options. Employees may be able to address some of the risks of retirement by purchasing long-term care insurance or annuities.
What’s the best way to keep aging workers engaged and energized?
Employers need to bolster their engagement by continuously investing in their growth and development and offering them new and exciting challenges. Sometimes older workers have ample institutional knowledge but lack the technical or strategic skills to be fully productive. Japanese companies continually refresh their work force because they’ve learned that recycled workers are less expensive and more productive than new hires. Embracing that notion requires a cultural shift by U.S. employers.
Are employers considering a return to defined benefit pension plans?
The only viable long-term solution, if you want to allow employees the option of retiring at 65, is to bring back defined benefit pension plans. Also, younger workers may start considering careers in public service rather than the private sector, which may preclude businesses from hiring the best and the brightest. While CFOs worry about meeting future funding needs, the current pension shortfalls were created by investing in ways inconsistent with eliminating pension risk. Employers have the liberty of structuring a plan they can afford, but investing properly. Investing pension assets in bonds, which is more common in the U.K., can eliminate stock market volatility and facilitate long-term affordability. The data suggests that employees are struggling with self-directed retirement plans, so employers will be in the retirement business whether they like it or not.
Lee Morgan is a consulting actuary with the Retirement Consulting Practice at Towers Watson. Reach him at (858) 523-5553 or [email protected].
