On the cusp: Retirement Horizon Employees Want to Know

Employees on the cusp of retirement may have different questions about retirement than their coworkers. While employees may know they are nearing retirement, they may postpone the exact day for months or years. A remarkable number of folks will reach 65 in 2025.  The peak of the Baby Boom was in 1960, and 65 years later (i.e., 2025) they may be eligible to retire. But, that doesn’t mean they can or will.  One analyst noted that “there will be around 10,000 people (taking the total of retiring males and females) turning 65 each day for the next two decades.”
‍

What kind of questions might these employees want answers to? The first may be “How worried should I be?” In the past, American workers relied on three sources of income to fund retirement: pensions, Social Security and private savings. A recent article by Politico notes that the demise of pensions removed one leg of that stool and most Americans haven’t made it back up with private savings. “Social Security … was never designed to be the sole source of income in retirement….” Most Americans do not sufficient amounts in 401(k) or similar accounts to make up for what Social Security leaves behind. And, Social Security itself may not have sufficient funds to keep up for long. That same Politico article notes that Social Security is at risk of exhausting its funds in the 2030s if strategic changes aren’t made soon. In other words, employees who retire in 2025 may have less than ten years of income from Social Security to rely on to fund their retirement. Additionally, folks are living longer, into their 80s than before (though the life expectancy of Americans declined for three years in a row prior to this article). Living longer may mean living beyond your savings, which is a significant concern to those set to retire.
‍

The New York Times recently tackled presenting a 5 years to retirement plan by noting common questions such as “Do you have enough savings? Is your money invested too aggressively — or not aggressively enough? Do you need long-term-care insurance? Do you have a will? What even is a reverse mortgage?” This sounds like the beginning notes of a panic attack about to spiral into a Sharknado-like storm. But taken separately, these questions are fairly common for those on the cusp of retirement. The predominate one might be “Is what I currently have enough?” Retirement experts, like those noted in the New York Times article, suggest that employees with 5 years before retirement begin by taking an assessment of their current situation. “How much have you saved, and will that money, plus Social Security and any other pension income, generate enough cash to cover your expenses in retirement?” From there, suggest the experts, a wide variety of scenarios can be run to help determine both the amount needed to live on in retirement as well as the method of saving for retirement that includes how aggressively an employee saves as well as how aggressively an employee invests.
‍

While plan sponsors can’t answer most of the questions that employees on the cusp of retirement have, they may be able to suggest a method of how to think about those questions. That is, plan sponsors may be able to provide employees on the cusp with a framework for thinking about an approaching retirement. As suggested, the best approach may be to assess what an employee currently has. Plan Sponsors can offer assessment tools and calculations on company intranet sites or via a weekly financial wellness email. They can also offer blank budgeting sheets for employees to use in determining savings leading up to retirement and in determining budgets during retirement. Plan Sponsors can also offer access to financial planners who can assist in providing information about rebalancing accounts and potential pitfalls for rebalancing too often.

‍