More than a year into the COVID-19 pandemic, retirement plan sponsors remain committed to improving their workers’ retirement readiness, according to the latest Principal Retirement Security Survey. More than 75% of employers say they are providing the education and resources needed to help their workers prepare for retirement—yet half are concerned that their workers may not be adequately prepared.
Among workers, nearly half say they are either very confident or somewhat confident they will have enough money saved to live comfortably through retirement.
“The latest findings showcase employers’ continued dedication to supporting their employees’ retirement readiness, as well as their overall financial wellness,” says Sri Reddy, senior vice president of retirement and income solutions at Principal Financial. “This is all while managing the challenges of running their businesses during a global pandemic and a market environment they remain cautious about.”
The survey found that the majority of employers have remained committed to providing benefits and financial resources throughout the pandemic to help employees manage savings and income in retirement. The effects of COVID-19 are top of mind for employers, with many reporting concerns about its long-term financial repercussions.
Fifty-three percent of employers are cautious about the economic outlook for the next year, whereas in July of last year, only 40% of employers had this concern. Employers are also concerned about how their employees will fare in retirement and whether their businesses will be able to attract and retain talented workers.
As to why they continue to offer retirement plans even in the face of COVID-19 challenges, 74% of plan sponsors say it is to encourage employees to save for retirement, 70% say it is to help provide financial security for their workers in retirement, 60% say it is to retain current employees and another 60% say it is to help employees have enough income in retirement to live on.
In addition, half of employers are concerned that their employees don’t have a plan about how best to manage their money in retirement. Only 16% of employers think most of their workers are saving adequately for retirement.
That appears to be a founded concern, as nearly 40% of workers are worried about outliving their retirement savings, and 49% of workers say they either don’t understand retirement income strategies or haven’t decided on an approach.
Seventy percent of workers say they would be interested in a guaranteed lifetime income offering in their investment menu. Nearly 60% of employers say they are interested in offering retirement income options to their participants, and 40% want to actively encourage their participants to select retirement income solutions.
Currently, more than 35% are encouraging as many plan participants as possible to invest at least part of their portfolio in retirement income options.
“Effective employee engagement can help workers prepare for retirement,” Reddy continues. “In addition to financial wellness education, we actively encourage the adoption of auto-features, including plan re-enrollment as well as retirement income solutions. Connecting workers with the right resources and plan features can help them recognize their options and feel more secure about their path forward.”
Employers say they can boost their workers’ retirement readiness by helping them:
- Get a handle on the health care costs they are likely to face in retirement (nearly 70%);
- Create a retirement income plan (nearly 70%);
- Develop a sound strategy to manage multiple retirement accounts (65%);
- Determine if they will have enough guaranteed income in retirement from such sources as Social Security and annuities (57%);
- Feel encouraged to save more (37%); and
- Join the plan as soon as they are eligible (31%).
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