Data and Research November 10, 2015

Research Finds Retirement Planning Calculators Lacking

HealthView’s research indicates that current income replacement ratio-based calculators fail to suggest sufficient income for retirees to afford quality health care and maintain their planned standard of living in retirement.
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Retirement savings based on income replacement ratio (IRR)-based calculators risk falling short of meeting retirees’ goals because IRRs significantly underestimate future retirement health care costs, says a HealthView Services white paper.

The paper, “Retirement Health Care Costs and Income Replacement Ratios,” highlights assumptions built into IRRs, reveals the shortfall in retirement health care savings when using IRR-based calculators and the additional savings required to close this gap.

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First, IRR-based calculators assume pre-retirement income is a good basis for calculating income needs in retirement, but HealthView’s research shows, when it comes to health care, this is not the case. IRR-based calculators also assume that household expenses in retirement can be projected forward using the general inflation rate of 2.5% to 3%; however, since health care costs are expected to rise at approximately 6% a year for the foreseeable future, IRRs will fall short on the savings that will be required to cover health care.

“IRRs provide financial professionals with a streamlined, top-down approach of assessing retirement savings and income goals without having to calculate and project individual line-item expenses,” says Ron Mastrogiovanni, founder and CEO of HealthView Services. “If they have saved for retirement using an IRR, most Americans assume they will have sufficient savings to cover their major costs. Many are in for a surprise when they find out that IRRs only cover a portion of estimated future health care expenses.”

NEXT: What is the gap?

“In fact, most employees only pay around 25% of their actual health care premium costs, while employers pick up 75%. In their first year of retirement, for comparable coverage, they will have to pay out of pocket costs around three times what they paid as employees,” adds Mastrogiovanni.

The white paper quantifies the retirement health care costs saving gap between what has been saved using an IRR and what will be needed to cover projected health care costs. It shows that a healthy 45-year-old male earning $50,000 and planning to retire at age 65 using an 80% IRR will face a shortfall of $127,299 in retirement health care costs.

This individual would be able to close this gap with additional annual contributions of $3,460 a year, or with a 50% company 401(k) match, an additional $90 per two week pay period. For a 55-year-old, eliminating the savings gap requires a $25,679 lump-sum investment or an annual additional contribution of $3,291 or $84 a pay period.

“Modest additional contributions to 401(k) plans, HSAs, Roths, annuities, or other products such as life insurance can help close this gap to reduce, or possibly even eliminate, the impact of unexpected health care costs in retirement,” says Mastrogiovanni.

The paper is available here. 

Break from the Grind November 10, 2015

New Excuses for Calling Out of Work

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Many workers aren’t above taking a sick day despite having a clean bill of health, according to a CareerBuilder’s annual survey.

Thirty-eight percent of employees have called in to work sick when they’re feeling well in the past year, up from 28% last year. Of the employees who have called in sick when feeling well, 27% said they had a doctor’s appointment, the same proportion said they just didn’t feel like going, 26% said they needed to relax, 21% said they needed to catch up on sleep and 12% blamed bad weather.

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Of the 52% of employees who have a Paid Time Off (PTO) program that allows them to use their time off however they choose, 27% say they still feel obligated to make up an excuse for taking a day off (compared to 23% last year). Of these employees who have a PTO program, 32% of those ages 18 to 34 say they still feel obligated to make up an excuse, compared to 20% of those 55 and older.

On the other hand, some feel they can’t afford to use a sick day, even when they’re ill. More than half of employees (54%) say they have gone into work when sick because they felt the work wouldn’t get done otherwise. Further, nearly half (48%) say they can’t afford to miss a day of pay, up from 38% last year.

NEXT: Busted for faking sick

The most popular months for employees to call in sick continue to be December (20%), January (15%) and February (14%), on par with last year’s survey results. And while less than one in 10 employees (9%) say they have ever faked being sick during the holidays, those that do most often say it’s to spend time with family and friends (68%), while others wanted to holiday shop (21%) or decorate for the season (9%).

While most employers claim to trust their employees, one in three (33%) have checked to see if an employee was telling the truth after calling in sick this year, compared to 31% last year. Of these employers, asking to see a doctor’s note was the most popular way to find out of the absence was based in truth (67%), followed by calling the employee (49%) and checking the employee’s social media posts (32%).

More than one in five employers (22%) have fired an employee for calling in sick with a fake excuse, an increase from last year (18%). Thirty-three percent of all employers have caught an employee lying about being sick by checking the employee’s social media accounts, and of those, 26% have fired the employee.

NEXT: Most memorable excuses

When asked to share the most memorable excuses for workplace absences they’ve heard, employers reported the following:

  • Employee claimed his grandmother poisoned him with ham;
  • Employee was stuck under the bed;
  • Employee broke his arm reaching to grab a falling sandwich;
  • Employee said the universe was telling him to take a day off;
  • Employee’s wife found out he was cheating. He had to spend the day retrieving his belongings from the dumpster;
  • Employee poked herself in the eye while combing her hair;
  • Employee said his wife put all his underwear in the washer;
  • Employee said the meal he cooked for a department potluck didn’t turn out well;
  • Employee was going to the beach because the doctor said she needed more vitamin D; and
  • Employee said her cat was stuck inside the dashboard of her car.
The national survey was conducted online by Harris Poll on behalf of CareerBuilder from August 12 to September 2, 2015, and included a representative sample of 3,321 full-time workers and 2,326 hiring managers and human resource professionals across industries and company sizes.

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