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Helping Employees Plan Better for Retirement The International Foundation financial education and retirement security initiative focuses on helping plan sponsors help participants and their families achieve a secure retirement. This article, which references materials developed by the Society of Actuaries (SOA), appears in Benefits Magazine as a part of that initiative. Julie M. Stich, CEBS, Associate Vice President of Content at the International Foundation, is a member of the SOA Committee on Post-Retirement Needs and Risks. Filling in the Gaps: Helping Employees Plan Better for Retirement by | Anna M. Rappaport and Greg Ward MAGAZINE Reproduced with permission from Benefits Magazine, Volume 54, No. 12, December 2017, pages 40-45, published by the International Foundation of Employee Benefit Plans (www.ifebp. org), Brookfield, Wis. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted. 40 benefits magazine december 2017 The International Foundation financial education and retirement security initiative focuses on helping plan sponsors help participants and their families achieve a secure retirement. This article, which references materials developed by the Society of Actuaries (SOA), appears in Benefits Magazine as a part of that initiative. Julie M. Stich, CEBS, Associate Vice President of Content at the International Foundation, is a member of the SOA Committee on Post-Retirement Needs and Risks. When planning for retirement, many people fail to consider issues such as retirement age and disability and nonfinancial aspects including health and social engagement. The authors provide insight on those concerns and suggest retirement planning resources that employers may share with employees. december 2017 benefits magazine 41 retirement security comprehensive approach to help employees plan Materials to be referenced include a new guide from for and manage their retirement is most effec- SOA and Financial Finesse entitled Retirement Health and tive when it includes a solid foundation of a good Happiness that lays out key issues people face in preparing A employer-sponsored retirement program. This ar- emotionally for retirement and offers tips for emotional ticle focuses on some of the other things an employer can do. and physical health and staying connected to others. SOA There is a growing recognition that while some employees also offers a series of decision briefs to help people focus on have plenty of money to retire well, many people in the Unit- the questions they need to ask. Six of them have just been ed States do not have enough for the retirement that they updated and are now available. These will be mentioned as would like. Society of Actuaries (SOA) research has shown well. that there are persistent gaps in retirement planning. SOA fo- cus groups have repeatedly shown that people plan by look- Challenges Faced in Planning ing at short-term cash flows and fail to consider many issues. These are examples of the challenges and barriers people Research from the Sightlines Project tells us that success in face with regard to retirement planning. retirement depends on more than just the money and entails a combination of financial resources, health management Planning Is About More Than Money and social engagement.1 Many retirement planning systems are primarily focused A new view of retirement planning is emerging. Retire- on financial issues and how much to save. It is important to ment planning is being seen as part of a broader financial bring in a broader set of issues. A review of Retirement Health wellness initiative. There is an increasing recognition that and Happiness is a good way to start people on this path. people who are having difficulty managing their month-to- month finances are not well-positioned to save for retire- Many People Do Not Save Enough ment, and a substantial percentage of U.S. residents—72% Only 18% of workers in the U.S. feel very confident about according to the American Psychological Association Stress having enough money for a comfortable retirement, ac- in America survey2—are under regular financial stress. cording to the Employee Benefit Research Institute (EBRI) This article identifies some key gaps in planning, provides 2017 Retirement Confidence Survey.3 With the shift to de- ideas to fill the gaps and references unbiased consumer- fined contribution plans, personal choices and actions are friendly literature that employers could use to support their increasingly important in facilitating retirement security. financial wellness and planning efforts. Employees without access to employer-sponsored plans are much less likely to have good retirement resources. Those who have access must still make good decisions and be learn more disciplined about accumulating their retirement savings. Education The U.S. Department of Health and Human Services offers Financial Education and Retirement Security Resources these retirement planning resources: www.hhs.gov/aging Visit www.ifebp.org/retirementsecurity for more informa- /retirement-planning-security/index.html. tion. What You Don’t Know in Retirement May Hurt You Retirement Age Really Matters Visit www.ifebp.org/webcasts for more details. The main strategies available for people who do not have From the Bookstore enough saved for retirement as they reach their intended re- Money for Life: Turn Your IRA and 401(k) Into a Lifetime tirement age are to work longer and retire later, work during Retirement Paycheck Steve Vernon. Rest-of-Life Communications. 2012. retirement, claim Social Security later and/or reduce expens- Visit www.ifebp.org/books.asp?8935 for more information. es. It is important to evaluate different options, but the SOA Ready or Not: Your Retirement Planning Guide, 44th Edition focus groups indicate that some people are retiring without Elizabeth M. McFadden. MEI Publishing. 2017. doing the math. AARP offers this retirement calculator to Visit www.ifebp.org/books.asp?9091 for more details. help crunch the numbers: www.aarp.org/work/retirement -planning/retirement_calculator.html. 42 benefits magazine december 2017 retirement security People Often Have Too Short of a Huge Gaps in Disability Protection www.consumerfinance.gov/retirement Planning Horizon Only about 30% of U.S. workers /before-you-claim/. Doing the math involves address- have long-term disability protec- ing a lot of different issues, but often tion beyond Social Security. A long- Going Beyond Money some of them are not considered. Re- term disability can derail retirement SOA research has repeatedly shown tirement planning is about making re- security in a variety of ways. When that there are many gaps in retirement sources last for the rest of life, but many people become disabled they need to knowledge and planning—some in- people tend to focus on their ability to replace lost earnings and potentially volving money and some not. At the pay their bills in the next two or three pay for high medical expenses. Not same time, employee benefits are evolv- years without doing a long-term retire- only could this lead them to stop sav- ing in a manner that makes employee ment calculation that includes risks. ing for retirement, but they also may decision making more important. SOA SOA focus groups have indicated that need to withdraw money from exist- and Financial Finesse recently released short-term cash flow planning is com- ing retirement savings. A disability Retirement Health and Happiness, a mon and that some respondents focus also can affect other income-earning new publication designed to improve on risk by indicating that they will “deal family members who may have to get financial literacy. This is the first in a with it when it happens.” Planning also involved in caregiving. Life Happens, series of educational publications de- is about nonfinancial issues like physi- a nonprofit organization, offers this signed to help Americans do a better cal health, social engagement and com- tool for estimating the income need- job of retirement planning. munity service. ed in the event of a disability: www The main message in this publica- .lifehappens.org/insurance-overview tion is that it takes more than money to People Are Living Paycheck /disability-insurance/calculate-your enjoy a successful retirement. The pub- to Paycheck -needs/. lication offers guidance and thought- People who are living paycheck to provoking questions designed to help paycheck often do not have adequate Social Security Claiming Strategies the reader emotionally and physically Are Not Carefully Considered emergency savings. A report from the prepare for a successful transition into Board of Governors of the Federal Re- Social Security is the largest and, in retirement. It attempts to take some of serve System found that 53% of survey some cases, the only source of retire- the same issues that are raised in the respondents indicated that they have ment income for many low- to middle- Sightlines research and bring them not set aside an emergency or rainy-day income people in the U.S. Since the down to actionable steps that people fund that would cover three months age at which a person claims Social nearing retirement can take. For each of expenses.4 The normal challenges Security affects lifetime income, work- topic, it raises issues and provides ideas. people face every year, such as home ers should consider carefully when to In response to the issue of so- repairs, automobile problems or an un- collect their benefit. Retirement ben- cial engagement, the guide raises the covered medical or dental expense, can efits can be claimed as early as the age question, “How do I stay emotionally easily turn into major problems. It is of 62 or deferred until the age of 70. healthy?” Tips include joining a club, difficult for people in this situation to Claimants who defer collecting So- association or religious organization save for retirement.
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