Turning to part-time work, launching personal businesses and seeking passion projects—these lifestyle choices are becoming increasingly prevalent among older Americans, including those who have “retired” from their career.
Indeed, the vision of retirement as a time for vacations and indulgence is quickly evolving to include elements of entrepreneurism and community engagement.
“Retirement is very personal,” says Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies (TCRS) and the Transamerica Institute. “Retirement means different things to different people. Everyone has a certain vision, and for many, work and leisure aren’t exclusive.”
This state of affairs means employers must take steps to address their workers’ desire to continue working past the “traditional retirement age” of 65. One of the simplest solutions, Collinson says, is the provision of retirement planning calculators. Employing these features allows participants to understand what their finances and savings might look like years down the line. If participants run a variety of potential scenarios, they can start to formulate a picture of their ideal retirement—whether that means retiring outright, embracing part-time work or even launching their own business.
“Plan sponsors can spell out five or six different scenarios, and then use the calculators to show the different savings and investing needs,” Collinson suggests. “With a healthy dose of reality, some scenarios may be more achievable than others. What we don’t want to do is risk a retirement nest egg on a business that may not be successful.”
Other ways to prepare participants include implementing financial wellness programs, and embracing plan design features such as automatic enrollment and auto-escalation. Taking advantage of these features helps participants get and stay ahead, says Diann Howland, vice president, legislative affairs, at the American Benefits Council.
Howland and Collinson both emphasize the further importance of implementing plan designs and support solutions that make phased, well-planned retirements possible. According to Transamerica research, just 18% of retirement plan sponsors today offer a formal phased retirement program.
“If a plan sponsor is going to communicate with participants about how to consider a phased, planned retirement, it’s not going to make as much sense if the sponsor doesn’t actually have a formal, phased retirement program,” Collinson says. “Participants need to prepare for various eventualities, so it’s best to have a retirement plan that can help address different situations.”
Howland echoes the idea, adding that employers should emphasize communications and education strategies for participants.
“There are always ways to improve the retirement savings system so that more people are covered,” she says. “Retirement readiness is a long process and it involves a lot of discipline and savings, but it can be achieved.”
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