Sources of Retirement Income: Calculations by the Center for Retirement Research at Boston College, based on the U.S. Census Bureau 2009 Current Population Survey

Prudential Identifies the Top 5 Trends

Prudential’s Fifth Annual Study of Employee Benefits: Today and Beyond illuminates the effects of changing workplace demographics and the economic environment on emerging  employee benefits. The report identifies 5 major trends that are driving employee benefits today.

In this post, we will examine trend #5: the changing realities of retirement planning.

  1. An employee driven benefits model is arising – link to part 1.
  2. Worker productivity is the next frontier in benefits cost management – link to part 2.
  3. Enrollment is being redefined to help make better choices – link to part 3.
  4. An increasingly diverse workforce must be addressed –  link to part 4.
  5. The realities of preparing for a secure retirement are changing.

Trend #4: The Changing Realities of Preparing for Retirement

Immediate Trump Long-Term Financial Needs

Saving is less of a focus in today’s economic environment. Workers’ top financial concerns are:

  • Top 3 Financial Concerns:
    • 86% – Job security.
    • 82% – Making ends meet.
    • 78% – Health insurance.
  • Way Down on the List:
    • 67% – Reducing stress levels.
    • 65% – Saving for retirement.

Level of Concern Varies with Age

  • Under 35: Paying debt, saving for children’s education.
  • Over 45: Health insurance and having retirement savings last.
  • 45 -54: Saving for retirement.
  • 55 +: Maintaining a healthy lifestyle, long term care, finding a trustworthy adviser.

Target Retirement Age Expectations Vary with Age

  • 63.6: average expected retirement age.
  • 54% plan to retire between 55 and 65.
  • 32% expect to retire between 61 and 65 (largest single group.)
  • Gen Y (under 35) most likely to say “don’t know.”
  • Gen X (35-45) most pessimistic – expect to work to 70.

There are 4 Distinct Segments with Different Priorities

  • Home Stretch: (av. age 61) within 5 years of retirement.
    • Priorities are medical & retirement benefits.
  • Clock is Ticking: (av. 54) Within 5 to 10 years of planned retirement age.
    • Having savings last, saving for retirement, having a financial plan.
  • Still Time to Catch Up:(av. 48) 11 to 20 years from planned retirement.
    •  Less concerned about making savings last. Concern about financial security in retirement. A prime target for education.
  • Building Nest Eggs: (av. 35) More than 20 years from planned retirement.
    • Retirement planning is off the radar.

Pre Retirees Expect Health and  Finances Concerns to Continue Through Retirement. 

  • They do not expect their needs to change.
  • 30% of employers offer retiree benefits (continuing medical, life, dental, LTC, etc.)
  • Most likely to offer them: Large companies (2,500+), firms with over 20 years’ history, public companies.
  • Least likely to offer them: Retail, food services, public administration, transportation, finance.

Companies are Taking a Cautious Approach Toward Retiree Benefits

  • More than half who offer them say they are unfunded.
  • 10% of them expect to discontinue them within the next 5 years.
  • 10% of them are not sure they will continue to offer them.
  • 15% anticipate offering them at reduced levels.
  • 25% – 35% are interested in Voluntary or Retiree paid options.

Snap! principle of a retirement planning based benefits:

Target benefits to employees who are most likely to value them, and educate all on the benefits.