Data and Research April 17, 2019

Gen X Struggling Most With Retirement Readiness and Confidence

However, among all age groups, the most frequently cited retirement fear is outliving savings.

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“What is ‘Retirement’? Three Generations Prepare for Older Age,” prepared by the Transamerica Center for Retirement Studies, looked at the retirement outlook of Baby Boomers, Generation X and Millennials.

All generations—Baby Boomers, Generation X and Millennials—associate retirement with freedom, enjoyment and being stress-free. Among those of all ages, 72% are looking forward to retirement. Among Baby Boomers, this is 81%. For Gen Xers, it is 70%, and Millennials, 68%.

However, among all age groups, 76% think people in their generation will have a harder time achieving financial security in retirement than their parents. This is slightly lower for Baby Boomers (69%) but higher for Generation X (81%) and Millennials (79%).

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Thirteen percent of workers expect to live to age 100. Among Millennials, it is 17%; Generation X, 11%; and Boomers, 9%.

Millennials are a digital do-it-yourself generation of retirement savers. Seventy-one percent are saving through a workplace retirement plan. At the median, they began saving for retirement at age 24. Among those participating in a workplace retirement plan, they are saving a median of 10% of their salaries. Fifty-three percent expect their primary source of retirement income to be self-funded through retirement accounts. They have a median of $23,000 saved in all household retirement accounts.

Twenty-one percent of Millennials frequently discuss savings, investing and planning for retirement with family and friends—significantly higher than for the older generations. Seventy-two percent say they do not know as much as they should about retirement investing, and 72% would like to receive more information from their employers about how to achieve their retirement goals.

Generation X is the first generation to have had access to 401(k) plans for the majority of their working careers. Some have taken loans and early withdrawals (32%), their retirement confidence is lacking, and many are behind on their savings. Seventy-seven percent are saving for retirement in a company-sponsored retirement plan or outside of that plan.

They started saving at a median age of 30 and contribute a median of 8% of their salaries. Only 14% have a written retirement strategy. They have a median of $66,000 saved in all household retirement accounts. Only 14% are very confident they will be able to fully retire with a comfortable lifestyle.

Seventy percent of Baby Boomers either expect or are already working past age 65—or do not plan to ever retire. However, only 56% are focused on staying healthy and only 40% are keeping their job skills up to date to ensure that they will be able to continue working.

Forty-two percent envision a phased transition into retirement, and 63% are hoping to stay with their current employer while transitioning into retirement.

Seventy-eight percent of Boomers are saving for retirement in a company-sponsored retirement plan or outside the plan. They started saving at a median of age 35. They are saving a median of 10% of their salaries and have a median of $152,000 household savings in retirement accounts. Only 26% have a backup plan for retirement income should they be forced to retire sooner than expected.

Among all age groups, they are planning to live to a median of age 90. They consider a person to be old once they have turned 70. Millennials consider a person age 70, at the median, to be too old to work, but for Boomers and Generation X, it is age 75.

Asked about their retirement fears, the most frequently cited is outliving savings.

The Harris Poll conducted the 19th Annual Transamerica Retirement Survey of 5,168 workers between last October and December. Transamerica’s full report can be downloaded here.

Administration April 17, 2019

Actionable Steps Engage Employees in Financial Wellness Programs

Meredith Ryan Reid, with MetLife, says the human element is also really important.

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Despite all of the talk in the retirement plan industry about financial wellness, only 20% of employers offer such programs, according to a new report from MetLife, “Financial Wellness Programs Foster a Thriving Workforce.”

This is primarily due to the fact that most employers are not aware of the lost productivity that financial stress among employees is costing their company, Meredith Ryan Reid, senior vice president, group benefits at MetLife, tells PLANSPONSOR.

As MetLife’s report notes, lost productivity costs a company of 10,000 employees 1,922 hours and $28,830 in lost productivity a week. For a single company of this size, that would be a loss of nearly $1.5 million, and throughout the U.S., employers report $250 billion in lost productivity each year.

What employers are more attuned to is that 52% of employees are planning to postpone their retirement, Ryan Reid says. “Many employers are aware that they are having a problem helping people prepare for retirement,” she says. “Sixty-six percent are concerned about workers remaining in the workforce for too long, and 42% are worried about higher benefit costs among older workers. This is something many employers are struggling with and do not know how to address.”

Not only are few employers currently offering financial wellness programs that could alleviate the problems of lost productivity and workers failing to retire in a timely fashion—but among those employees who are offered a financial wellness program, only 19% take advantage of it, MetLife’s report reveals.

It is this lack of traction that frustrates employers and prevents them from offering financial wellness programs, Ryan Reid says. To date, that may be because broadly designed financial wellness programs are not doing an effective job of “serving diverse populations in terms of demographics and locations,” she says. “What is really going to meet employees’ needs and create meaningful improvement is personalized information that is easy for them to use.

“Some of the success we have heard about are financial wellness programs that break things down into activities and smaller actionable steps—goals that keep employees engaged,” Ryan Reid continues.

In addition, in many cases, employers are offering a patchwork of financial wellness education from various providers, she says. “They may be on different platforms, with different touch points,” which makes it difficult for employees to relate.

“As employers start to think about the financial wellness products available, they should be looking for those that are customer friendly, and digitally delivered with the support of a call center,” Ryan Reid says. “With the financial wellness that we offer, we sit across the table with employees or speak with them on the phone” to learn about their personal situation. “You need to have holistic conversations in one-on-one situations. The human element is really important. When employees have to wade through the information on their own, they can be overwhelmed.”

MetLife’s program if offered on a digital platform that permits employees to aggregate their accounts and use calculators to plan for both short-term and long-term goals, she adds.

If an employer is unable to offer personalized one-on-one advice, MetLife’s report says that they can at least, on a company-wide basis, “gather demographic data—generation, life stage, family structure and financial circumstances—and analyze existing benefit data—such as retirement plan contributions and loans and disability claims—to assess the financial health and coverage of employees. This quantifiable data can help employers define their financial wellness objectives and tailor benefits accordingly to best help their employees.”

Once retirement plan advisers and sponsors begin to embrace this type of personalized approach to financial wellness programs, and sponsors witness the positive results, Ryan Reid foresees financial wellness programs gaining more traction. “We have a very long way to go on the adoption curve,” she says. “We are only in the early stages.”

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