PSNC 2012: How Much is Enough?

June 8, 2012 ( - The term “retirement readiness” is all the buzz, but what does it really mean for plan participants?

Retirement readiness means participants have accumulated enough wealth to retire with dignity and “retire on their own terms,” said Erica Stebe, assistant vice president, client communication consulting at MassMutual Retirement Services, a panelist at the 2012 PLANSPONSOR National Conference.

Some participants may want to retire at age 55, while others may want to continue working. It is not just about having adequate income, but also about asking, “Are you healthy enough to retire? Are you mentally prepared to retire?” Stebe added. 

Retirement readiness must be measured on an individual level rather than just a plan level because the definition varies from person to person, said David Roberts, benefits manager at Intersil Corp.

So how can participants achieve retirement readiness? And how can plan sponsors and advisers help them achieve it? For starters, Stebe said plan design and communication must go hand in hand.   

A plan design with automatic enrollment at 3%, Stebe cited as an example, gives participants a false sense of security and may cause them to continue contributing the same amount throughout the years.

Retirement planning tools can be an effective part of a plan, but only if employees are using them, added Robert DeSmidt, chief financial officer at Klinger Companies Inc. “Utilization is key,” he said.

But the greatest plan design in the world will not matter without effective communication surrounding it, which is why plan sponsors must encourage participants to be involved in their retirement readiness. “Bring them into the picture so that they can start to make decisions about what they need to do now,” said Mary Ellen Whiteman, communications manager at T. Rowe Price Retirement Plan Services Inc. “What can they do to change the outcome instead of waiting until it’s too late?”

Plan sponsors must be easily accessible and make the participant feel comfortable discussing retirement readiness, DeSmidt added.

Communication should be targeted for different ages and cultures. “Everyone is different. Some people like to read, some people like to interact,” Roberts said.

A financial wellness program, he added, can help prepare different age segments for retirement by improving their overall financial health. For 20- to 30-year-olds, for instance, the program could focus on how to budget, get a car loan or buy a house.