Retirement Consulting Insights
Is Delayed Retirement Impacting Your Bottom Line?
OCTOBER 5, 2021
Americans are living longer than ever before — about 30 years longer, on average, than a century ago — so the risk of running out of money in retirement is very real.
Employers are coming to grips with this problem and are starting to understand that the financial wellness of their workforce — or the lack thereof — has a direct impact on productivity in the workplace and on the organization’s bottom-line results.
Research shows that Americans are struggling with their personal finances:
51% of Americans feel “very” or “somewhat” anxious about their financial situation
Only 27% of working adults are on track to retire
62% of working adults plan to continue working in retirement
When Workers Are Financially Stressed, Everyone Pays the Price
Employees:
62% of Americans live paycheck to paycheck
22% of workers have dipped into their emergency savings
69% of Americans say they have less than $1,000 in a savings account
49% of employees believe they’ll need to tap their retirement plans prior to retirement
Employers:
43% of workers spend time on their personal finances while at work
55% of human resources professionals surveyed saw an increase in 401(k) withdrawals
Increased absenteeism (47%) and healthcare claims (41%) are two ways financial stress can affect an organization
For every dollar saved for retirement, at least 20 cents is withdrawn too early
Retirement Readiness: Not Just an Employee Issue, But a Business Issue
A workforce that is financially unprepared to retire can impact a business in a wide variety of ways. It is estimated that employers spend over $50,000 per employee each year the employee delays retirement. These costs include:
- Potentially higher labor costs
- Increased healthcare premiums
- Lower productivity due to financial stress
The long-term financial impact to your organization of delayed retirement can be significant.
Estimated Cost to Employers of Delayed Retirement
100 person company with 3 employees delaying retirement:
1 Year = $150K; 3 Years = $450K; 5 Years = $750K
1,000 person company with 30 employees delaying retirement:
1 Year = $1.5M; 3 Years = $4.5M; 5 Years = $7.5M
10,000 person company with 300 employees delaying retirement:
1 Year = $15M; 3 Years = $45M; 5 Years = $75M
Given the implications, employers feel an even greater responsibility for their employee’s retirement readiness: 80% feel extremely or very responsible for helping employees prepare for retirement, compared with 22% in 2012. And 83% of employers now believe that employee financial wellness programs and tools help create a more productive, satisfied and engaged workforce.
How USI Consulting Group Can Help
Our team evaluates retirement plans and implements strategies to better prepare your employees for retirement and help offset the financial impact to the organization. There are many ways we can help, including:
- Enhancing existing plan design
- Conducting a provider search to put you into a plan that gives you and your employees the best outcomes
- Providing ancillary retirement benefits like a Nonqualified Deferred Compensation Plan and/or a Direct Recognition Variable Investment Plan (VIP) for employees who seek high tax-deductible contributions in excess of the defined contribution plan limits to help them save more
- Developing an employee education program to help them understand the value of saving, drive participation and improve their financial wellness
To learn more, contact your local USICG representative, email information@usicg.com or visit www.usicg.com.
Sources:
NextAdvisor study, June 2020.
Schroders US Retirement Survey 2021.
In 1900, the average life expectancy was 50 years old. According to the Centers for Disease Control and Prevention, the average life expectancy in the U.S. is 78.6 years old as of 2019.
Clever’s COVID-19 Financial Impact Series, September 2020.
John Hancock, 2020 Financial Stress Survey.
GOBankingRates’ Sixth Annual Savings Survey, 2019.
PwC, Employee Financial Wellness Survey, 2021.
Purchasing Power® survey of HR professionals and benefit brokers, December 2020.
For Every Dollar Saved For Retirement, At Least 20 Cents Is Withdrawn Too Early, Forbes, February 2020.
Why Employers Should Care About the Costs of Delayed Retirements, Prudential, 2019.
Bank of America’s 10th annual “Workplace Benefits Report,” 2020.
1021.S0824.99137a
SUBSCRIBE
Get USI insights delivered to your inbox monthly.
