Retirement can be exciting, but most people agree that our population’s oldest working segment is not financially prepared for retirement. As management, it is your job to ease employees into retirement with a benefits package. These are often your most knowledgeable employees, and you want to ease their transition while controlling any unexpected expenses. A recent study indicated that the cost of one year of delayed retirement could be equal to the value of sick leave and personal time off on a company-wide basis.
How to Ease an Employee Into Retirement?
If you have workers close to or past retirement age, they should discuss retirement with their employee benefits consultant about transition programs. It can be hard to have that conversation, so having guidelines beforehand will make the conversation easier. Also, implementing programs like Medicare workshops will incentivize them to retire “on time”, and year-round informational sessions will ensure they are prepared.
It can be helpful to have a Medicare concierge to explain their options and assist with the transition. You can keep the program optional, but it may help many choose to change their employment status, making the conversation even more comfortable.
What Are the Retirement Risks?
Given how chaotic this year has been, it is self-evident that retiring this year or next does pose some security risks. Making these risks clear is not only the right thing to do but will enable fully informed decisions.
- Recession – Nobody was prepared for the pandemic-driven dark financial realities that 2020 has brought us. Already impacted by the global recession in 2008, retirees now face an economy expected to shrink by 3% this year. Recession increases unemployment, which redirects funds designated for retirement savings. Then, it reduces payroll taxes collected that fund pensions. Also, the recession may cause employers to suspend or scale back their retirement programs.
- Low-interest rates – Interest rates have been at historic lows dating back to the financial crisis of 2008. For individuals, low-interest rates can be useful, but low rates make it hard for retirees to generate sustainable income.
- Environment – Health risks posed by the pandemic and other environmental problems may cause retirees to dig deeper into their retirement savings to pay for health care costs.
As your employees plan for retirement, make them aware of these risks, and give them ideas to offset them.
How Do You Prepare Your Retirees for These Risks?
56% of workers between ages 55 and 64, and 77% of workers over 65 have never used their employer-sponsored plan provider for investment information or advice. The best course of action is to encourage your employees to use the retirement benefit package you already offer. Firstly, you must understand some of the attitudes of older employees that are preventing them from participating.
- Generic advice – To get older employees on board with your benefits program, they must understand how it fits their specific circumstances. Highlighting common but general scenarios might help employees understand the value of retirement benefits.
- Outreach – Many employees feel reticent to approach you about retirement help. Having a general outreach program that informs everyone about your benefits package would be extremely advantageous.
- Doubt – Many employees don’t want to give their employers more access to their financial situation. By stressing the privacy of retirement planning, you can avoid these obstacles.
Ensuring a Smooth Transition
You have a responsibility to your employees to assist them in retirement planning. You’ve helped your employees by building a good benefits package, now leave them with sound advice as they retire. An app that collects your financial planning resources can help. Making benefits easily accessible encourages employees of all ages to review benefits options and gather information. Contact us to learn more.