American employees struggle to save effectively for retirement
For a variety of reasons, it’s becoming more difficult for Americans to save effectively for their retirement. We’ve seen a perfect storm of factors complicate the process – the workforce is skewing younger, the economy is bitterly competitive and people are so distracted by their hectic current lives that it’s difficult for them to prepare for the future.
It’s worth discussing whether companies can step in and help their employees better handle their retirement planning concerns. You could argue that this is a vital aspect of corporate health and wellness – while most organizations focus primarily on improving their workers’ physical and mental health, the financial angle is important as well. Surely, there are organizations that can do more.
The problem in the present
It’s evident at this point that Americans have a widespread problem with saving for retirement. The statistics make it clear, according to Employee Benefit News. For example Teresa Ghilarducci, an economic policy analysis expert at the New School for Social Research, recently found that 33 percent of current workers aged 55 to 64 expect to be “poor” or “near-poor” in retirement due to inadequate savings. Furthermore, 55 percent anticipate relying solely on their Social Security income.
“People have not caught up from The Great Recession,” Ghilarducci explained. “In all the ways they would prepare for retirement, the middle class were hit really hard.”
The economy isn’t recovering quickly enough for older Americans to recover their retirement savings. Something else needs to be done to help people keep up.
The direction of the future
As awareness spreads of the serious issues facing today’s aging population, we may soon begin to see the dialogue about retirement savings change. Ghilarducci told EBN that she expects to see a new focus in the national discourse.
“All the programs that help the elderly will be stressed,” she said. “Whether it’s nursing homes that take Medicaid, whether it be housing programs for elderly or home health care – all those safety net programs will face a lot of pressure.”
Ghilarducci added that as external economic factors remain harsh, it’s likely that the liability of dealing with the elderly will keep growing. This means employers will have to do even more to help their workers maintain their financial wellness.
What employers can do
So let’s talk specifics – what programs and policies can employers use to improve the outlook for their employees’ financial wellness?
According to Ghilarducci, anything that pushes people toward saving more – and saving earlier in life – can be a step in the right direction.
“Employers should shore up their 401(k) plans, consider auto-enrollment and consider paying more for pensions because workers may appreciate retirement funds more than wages and perhaps they could shift compensation towards retirement,” she said.
We may be moving toward an era in which companies rely upon much more defined benefit plans to manage the financial wellness of their employees. Under this model, better saving habits would become a reality for everyone. The entire workforce would be better off in the long run.