TWO YEARS INTO COVID: PROTECTING EMPLOYEES’ RETIREMENT
Three considerations to help
get employees back on track
In today’s uncertain world, employers may not always be able to predict what will impact their employees’ retirement preparedness. Yet, with the right tools in hand … employees can rest easy knowing that their financial futures will be secure, no matter what comes next.
By Roberta Rafaloff
As we pass through the two-year mark of the pandemic, employers are now reflecting on how the COVID-19 economy has impacted Americans’ long-term financial goals. From the stock market volatility of the pandemic’s early days to rising inflation today, research shows that many employees have had to put their financial futures—and, more specifically, saving for retirement—on the back burner.
Indeed, MetLife’s 19th Annual Employee Benefit Trends Study (EBTS) found that, as employees prioritize their short-term financial needs, nearly one in five has had to dip into their savings to pay for monthly bills, and nearly the same percentage has taken an early withdrawal from a 401(k) plan or similar. Perhaps due in part to these issues, 43% of all employees expect to postpone retirement due to their financial situation.
A lack of retirement prepared ness is impacting employees’ overall well-being. When employ-ees are behind on their retirement savings, it can impact more than just their bank accounts. Indeed, MetLife’s EBTS has found that poor financial health is a top driver of poor mental health—which makes sense when you consider employees’ pain points around retirement. Employees’ biggest concerns around their financial well-being, like not being able to afford the cost of healthcare in retirement (62%) and outliving their retirement savings (59%), can be stressful to think about. For this reason, employers should offer not only benefits that help employees save more, but also resources—like retirement preparedness workshops, for example—that can take the pressure off of employees and help them feel more in control of their finances.
More is expected of employers to help employees prepare. Against the backdrop of pandemic-led retirement challenges, employ-ees are looking to their employers for solutions more than ever. In fact, MetLife’s research found that employees today were more likely to say their employer has a responsibility for their financial well-being than in early 2020 (46% vs. 40%, respectively). Resources ranging from voluntary benefits, like pet or legal insurance, to lifestyle-based offerings, like financial wellness classes and personal finance apps, can be great ways for employers to help their employees build positive financial habits and set themselves up for success. Thankfully, research has demonstrated that these resources do actually work in helping to cut down on financial-related anxieties—meaning there’s a high return on investment for employers. Two-thirds of employees (66%) say their current benefits package reduces their financial stress and another 67% say their employer benefits help them worry less about unexpected health and financial issues, according to the same study
Interest in emerging solutions is on the rise. When it comes to specific retirement offerings, employees are increasingly seeking out solutions beyond savings vehicles, such as institutional income annuities, that can help them feel more financially secure in retirement. Just consider that two in three employees (67%) are ‘very” or “extremely” interested in their employer offering solutions that convert their defined contribution retirement plan into a stream of income for the rest of their life—up from less than half (45%) in 2020. Likewise, guaranteed income in retirement (79%) is a top financial benefit that employees are interested in their employer offering, the research found. Income annuities guarantee retirees a fixed stream of income for life—meaning that they’ll never have to worry about outliving their retirement savings. Against the backdrop of market volatility and other economic factors, knowing that your income is protected—even in the face of uncertainty—can be a huge relief for employees. To help raise visibility around these offerings, employers should take steps to improve their communications around retirement, from sharing weekly savings tips via email, to holding regular Q&A sessions to field questions around the specific retirement benefits they offer.
In today’s uncertain world, employers may not always be able to predict what will impact their employees’ retirement preparedness. Yet, with the right tools in hand—from 401(k)s to income annuities—and the proper education on how to take advantage of them, employees can rest easy knowing that their financial futures will be secure, no matter what comes next.
For more information:
MetLife 19th Annual Employee Benefit Trends Study
Roberta Rafaloff is vice president, Institutional Income Annuities (IIA) for MetLife. IIA enables defined contribution plan sponsors to provide guaranteed retirement income to their plan participants to help them achieve successful retirement outcomes. The business also offers specialty annuity products including charitable gift annuity reinsurance and lottery annuities. The division is part of Retirement & Income Solutions, the company’s institutional retirement business, which historically has been responsible for over 20% of MetLife’s operating earnings.