ENDWELL — The difficult economic and financial landscape of the last few years has led many employees to postpone retirement a few years in order to build up an adequate source of income for when they do finally leave the work force.
That means employers are having to adapt to an increasingly older work force with its eye on retirement planning.
“We are facing a time where we need to redefine what retirement is and how employers structure their benefits to match up with an aging work force,” says Brian Schmidt, a financial planner with United Advisors in Endwell. “As we all live longer, our current systems are getting strained under a ‘normal retirement age’ of 65.”
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For some workers, he says, increasing the “normal” retirement age by say, five years to 70 is all that’s needed to meet the gap in savings for retirement. Others need a more comprehensive solution.
Recent research by Washington, DC–based Employee Benefit Research Institute (EBRI) shows that for one-third of households between the ages of 30 and 59 in 2007, working those five extra years will not be enough to fund their retirement sufficiently. The result is that a large number of retirees are likely to run short of what they need to cover their general expenses and uninsured health-care expenses following their working years.
“It would be comforting from a public policy standpoint to assume that merely working to age 70 would be a panacea to the significant challenges of assuring retirement income adequacy, but this may be a particularly risky strategy, especially for the vulnerable group of low-income workers,” Jack VanDerhei, EBRI research director, said in EBRI’s report.
This is where employers can come into play and help their workers prepare in advance for retirement, Schmidt says. United Advisors (www.united-advisors.com) urges employers to help their employees look at both sides of the retirement equation — expenses and income.
“Too much focus has been on the income side, and employers are very hesitant to discuss the spending habits of their work force,” Schmidt says.
Still, working until a later age is a good option for many people that provides some additional benefits. EBRI research shows that nearly two-thirds of households aged 50-59 in 2007 would be considered ready for retirement at age 70, compared with 52 percent of those same households if they were to retire at age 65.
Another option employers can put on the table is transitioning employees to retirement by allowing them to continue as part-time workers. “For some, retirement may mean working only two days a week,” Schmidt says.
The bottom line, he says, is that the concept of retirement needs to change to match current economic realities.
“While there are no regulatory mandates to do so, employers that truly want to help their work force will begin to address these questions and adapt their benefit programs,” Schmidt says.
EBRI’s full report, “Is Working to Age 70 Really the Answer for Retirement Income Adequacy,” is published in the August 2012 EBRI Notes and available online at www.ebri.org.
EBRI is a private, non-partisan, nonprofit research institute based in the nation’s capital that focuses on health, savings, retirement, and economic-security issues.
Contact DeLore at tdelore@tgbbj.com
