Many American workers count on their employer’s retirement and pension plans as golden parachutes into those easy retirement years. But could they be in for some hard landings if the chutes fail to open?
It seems, unfortunately, that many may be let down not-so-easily, as it appears than many U.S. companies are as lacking as American workers in planning for employees’ retirements.
They don’t get the urgency
Many companies falsely believe that their workers will be poised to retire at 65 without experiencing financial hardship. They fail to recognize that many workers simply have never socked away enough funds to live comfortably once they retire.
In 2018, the Transamerica Center for Retirement Studies conducted a survey of employers. They found that 70 percent of companies polled believed that their workers had sufficient funds to retire as planned. Yet, just 60 percent of the employees surveyed were confident of same.
Other research done by the Employee Benefit Research Institute concluded that just 57 percent of households in America where the head of household was between 35 and 64 remained on-track with saving money for retirement.
Part of the problem may lie with workers’ reluctance to share their concerns about retirement with Human Resources (HR). Perhaps they fear that tipping off HR to the precariousness of their situation could draw unwanted attention to them or even force them out the door too early.
Flex-retirement benefits underused
One way in which potential retirees might benefit is from phased retirement programs that allow workers to transition to full retirement by gradually cutting back on their job duties and hours. Such a plan allows them the time off work they may need to return to school or training to prepare for a second career or to care for elderly parents or disabled spouses.
Still, only about 10 percent of large companies offer these flex plans for retirement-age workers. These problems might include some of the following concepts:
- Workers 55 and older who have worked 10 years or more with the company can reduce their work hours 20 percent and receive 20 percent less salary. They would still be eligible to accrue pension benefits and retain their health insurance.
- Those 60 and older who have at least five years of work with the company could take as much as a 50 percent reduction in hours if they have other options for health care coverage.
- Those employees with seven years work with the company who are at least 55 are free to negotiate their own phased in retirement will still enjoying full benefits.
Keep the knowledge with the company
These plans can benefit both workers and employers, as they allow companies to retain workers who often have vast industry knowledge and contacts that would otherwise walk out the door with them. Even companies that don’t have formal phased retirement in place might agree to negotiate with a valued worker to avoid losing their wellspring of experience and knowledge.
Pave your own retirement path
But the best retirement plan of all is one that you don’t have to count on others to fund or fulfill. Determining your future retirement plans begins now, and a Lake Forest estate planning attorney can offer you several options to choose. Don’t delay planning your future — take action now.