76 million
(1) Raising Health Care Costs. Health care costs will conservatively raise anywhere from 12% to 18% per year. As the technology of keeping us alive longer only continues to improve, there will be no relief to the cost of doing so.
(2) Disappearing Pensions. More and more companies are eliminating their company sponsored defined retirement plans. And they are doing so while not significantly increasing their defined contribution offerings.
(3) Inadequate Personal Savings. Not withstanding the recent turmoil in the stock market, Americans simply do not save enough money period, let alone for their retirement years. Study after study indicates that we save less per individual of any major industrialized nation.
(4) Forced To Retire Far Sooner Than They Had Hoped. In a recent study of retirees and pre-retirees, 50% planned to work past age 65. Only 13% have done so. Most of been forced to retire because of unexpected health problems or loss of their job. More than 30% of retirees planned to work part-time after their formal retirement, but only 10% have been able to accomplish this goal. The same reasons have prevented the other 90% from working part-time: poor health and no job opportunities.
Of course this presents a double whammy for retirees who are forced to quit working early and/or cannot get part-time work. They have significantly less time to contribute to their retirement savings and they have to use what savings they have accumulated for more years than they anticipated.
(5) Unrealistic Expectations About Reducing Costs. Only 10% of retirees state that they have significantly reduced their expenses from their pre-retirement levels. Most say that with inflation and higher taxes, it is just impossible to lower your expenses from what you were paying just prior to retirement and keep a similar standard of living.
So your employees need pre-retirement help, but why should companies pay for it? That’s a good question. Why should a company invest any more money in an employee that will retire and no longer be of benefit to the company? This question is especially relevant in light of today’s tough economic times.
We believe that the answer is both no and yes! Companies should not get involved with offering financial advice, either in-house, sponsoring outside providers or by subsidies. Despite disclaimers, the risk of lawsuits stemming from financial downturns or unexpected catastrophic situations are just too great. Even without the potential legal consequences, a company would risk the tarnishing of its image and, therefore, its employee branding. If employees lost a portion of their retirement nest egg by following recommendations made by an organization or individual somehow linked to the company, they would invariably blame the company to some extent.
Fewer companies provide this benefit for these very reasons. Other companies only offer it to their top executives, who presumably have more financial sophistication. With the preponderance of financial companies out in the market today, all levels of employees can find needed assistance on their own for reasonable cost. Investment advice is no longer confined to the wealthy.
However, there are at least four benefits to a company that provides some modest pre-retirement counseling to its employees:
A. Improve Employee Branding. Goodwill will be generated with current employees. This type of effort demonstrates that the company does care about its employees and is willing to invest in their well-being.
B. Create A Pool Of Experienced Part-Time Workers. If structured the right way, retirement counseling can provide options to the retiring employee to return to the company in a limited role. This might be especially beneficial to a company if the retired employee fills lower level vacancies to which they would not normally do so. This allows the company to staff positions with extremely qualified (perhaps over qualified) personnel who know the company and are happy to assume vacancies that have less pressure.
C. More Voluntary Lay-Offs When Needed. If employees feel better prepared for retirement, they are more likely to accept requests for voluntary lay-off packages when the company offers it. This is especially true if the employee has reasonable prospects for part-time work with the company. The company would have less need for in-voluntary reductions in staff and the problems inherent with them.
D. Better Succession Planning. With better planning for retirement, comes a more orderly flow towards people leaving their jobs. Companies have more advance notice to plan for openings and fill vacancies.
Some modest pre-retirement counseling does benefit the company. A good program can be constructed that generates these positives while being cost effective. If you'd like to explore this concept further, please feel free to get in touch with me.
For More Information:
http://www.gatewayinternationalgroup.com/
http://www.larrymaglin.com/
http://www.lawrencemaglin.com/
http://www.joekran.com/
http://www.josephkran.com/
Staff Review by: Joseph (Joe) Kran, Lawrence (Larry) Maglin, and Rick Spann
