In 1990, 15 million American workers were age 55 or older. By 2010, this number had increased to 30 million. By 2020, the government projects there will be over 41 million older workers.* With this aging of the U.S. work force, it’s important for employers to take care that their retirement education programs meet the needs of pre retirees as well as those of younger employees.
How are the communication needs of older employees different?
Most retirement education materials focus on encouraging employees to enroll in the company’s plan and contribute as much as they can to their plan accounts. Increasing the number of younger and lower paid plan participants to help the plan meet nondiscrimination testing requirements is often one goal of these materials. Communications concentrate on plan basics: how the plan works; the advantages of pretax contributions, tax-deferred compounding, starting early, and contributing regularly; and how to invest plan contributions to reach retirement goals. Investment education stresses “growing your account.” This is important information for most participants. But, as employees move closer to retirement, they need additional information about their plan distribution options and how to invest accounts to preserve their assets.
With all the statistics on the “baby boomers” not having saved enough for retirement, don’t older employees need to be encouraged to contribute, too?
Yes, they do. But you may want to customize some “contribute more” messages to appeal specifically to pre retirees. If your plan allows catch-up contributions, send annual reminders to workers age 50 and older. Many of these employees are in their highest earning years. Consider participant newsletter articles or other communications that remind participants that they can really focus on retirement “now that the kids are through college” or “now that your home mortgage is paid off.” Online tools that help older workers project their retirement budgets and calculate the gap between current retirement savings and the amount of savings needed at retirement may be particularly helpful.
What kinds of distribution information do these employees need?
Before they are actually ready to retire, employees need to be aware of the types of retirement distributions available from your plan and how each option works. An employee’s distribution options can have an impact on retirement planning. Older participants also need to know that they generally must begin taking annual required minimum distributions from their plan accounts after they turn age 70½.
What about investment education?
Targeted communications can help older employees understand the need to review their asset allocations periodically as they move closer to retirement and, in many cases, gradually shift some of their growth investments into more conservative investments that can help them preserve their savings. The impact inflation can have on retirement expenses and the resulting need to keep some growth investments to stay ahead of inflation is another important topic for both pre retirees and retirees.
How about communicating with retirees who stay in the plan?
Along with providing statements, you should communicate to retirees the importance of keeping the plan informed of changes in their lives, such as residential or e-mail address changes and family changes that may require them to update their beneficiary designation(s).
For more information, please contact our JKJ Retirement Services representatives.
Author: Ben Hall, ChFC, AIF®
VP & Managing Director – JKJ Retirement Services
* Labor Force Projections to 2020: A more slowly growing workforce, U.S. Bureau of Labor Statistics, 2012
Securities and investment advisory services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. JKJ Companies are independently owned and operated.