Retiring an Aging Workforce

By Jim Trujillo

It’s no new news that America has an aging workforce. The U.S. Census Bureau estimates there are roughly 72 million baby boomers today, many of which are in or are coming up on retirement age. Improvements in health care and a decrease in smoking has led to longer, healthier lives, thus many U.S. employees are working longer.

This places the burden on the employer to carry rising healthcare costs for senior employees.

Many companies are trying to divert this silver tsunami by offering Early Retirement or Voluntary separation packages to keep the ship righted, while others are forced to make reductions involuntarily. Meanwhile, studies show that nearly half of the boomer population may never be able to afford to retire on their own.

One of the most prevalent concerns boomers have around retirement is money. Many struggle with questions like, “Will I have enough saved in retirement?”, ”Can I maintain my current lifestyle without my current income?”, or “How am I going to afford everything I want to do in retirement?”

The recent PwC survey on Employee Financial Wellness found that financial matters was the number one stressor employees face. More employees cited this stressor more than any other category combined – beating out their job, their relationships and their health concerns.

In addition to this, 46% of workers reported spending at least 3 hours per work week thinking about and/or dealing with financial related matters. That’s almost 10% of their work week focused on their personal finances instead of on their job – so it’s not just stressful, it’s time consuming!

To add to this stress, many employees are now responsible for funding their own retirement. Over the past two decades, many employers have made the shift from providing employees with Defined Benefit Plans (pension) to Defined Contribution Plans (401(k)). Before this shift, pensions were the primary source of retirement funds for past generations. Now, many employees face the challenge of accumulating and growing their savings to support their individual retirement goals all while supporting their current lifestyles.

But how does a company that wants to protect their employees and maintain a generous brand and culture do this?

Financial wellness is a hot topic in the employee benefits space. If utilized correctly, it can be a key component in helping your employees feel more prepared for their non-working years.

However, many companies are jumping in on the “financial wellness” bandwagon just so they can check off a box, and unfortunately, it’s at the detriment of their employees. Traditional financial wellness programs have focused solely on the basics like saving, budgeting, or debt management. But many employees have found that these broad overviews on a wide range of financial subjects doesn’t necessarily help their personal financial situation.

One major indicator that your employees may not be benefitting from your financial wellness program is your employee participation rate. A common theme we come across is employers provide the software, tools, and materials that explain their robust benefits to their employees, but still their employee participation is low. They assume that providing employees with these resources is more than enough for them to fully understand the benefits offered to them, but that may not be the case.

Nearly half of all employees do not understand their company’s employee benefits. Did you read that right? Yes, approximately 40% of all employees do not fully understand the benefits offered to them by their employer. If they don’t understand their benefits, how can they take advantage of them? The reality is, they don’t. Employees who don’t understand their benefits, disengage and potentially leave something on the table.

So here we have a recipe for personal financial disaster: a massive aging workforce, nearing retirement, who’s tasked with funding their own future livelihood, all while not fully understanding the current benefits offered to them.

What’s an employer to do?

HR teams are now integrating their company’s benefits packages by partnering with financial advisors to provide individualized financial consultations for their employees. Education is a crucial factor in helping your employees fully understand and participate in your company’s benefits. In fact, according to a recent AARP survey, over 60% of companies are now offering one-on-one financial counseling for their employees. This is up from just 22% in 2001. Providing employees with an objective, third-party resource can allow them to ask the personal and sensitive questions that are most important to them.

Because the reality is, employees don’t want their employer directly involved with their personal finances. It’s engrained in our culture to not talk about money. Employees can feel uncomfortable at work knowing their employer is privy to their personal financial situation, but it doesn’t have to be an invasion of privacy.

Providing employees with an unbiased third-party advisor can take the intimate financial burden off HR’s shoulders, while still supporting your workforce with a critical retirement planning resource. As HR professionals, it’s imperative that you protect your employees and provide them with the tools they need to help them succeed, and one of those tools may be a financial advisor.