Enhancing Retirement Security for Older Workers

According to the Transamerica Center for Retirement Studies, 76% of employers believe that many employees plan to continue working either full-time or part-time in retirement, but only 18% have a formal phased retirement program.

Building a supportive community for older workers is crucial in enhancing their retirement security. Employers play a significant role in this process by implementing policies and practices that not only retain older workers but also improve their financial stability in retirement.

Enhancing retirement security requires recognizing demographic disparities, bridging inequalities, and implementing solutions so that everyone can retire with dignity.

This article explores the various ways in which employers can contribute to the retirement security of older workers, drawing on recent research and policy recommendations.

 

Shifting Retirement Expectations

According to a recent survey by the Transamerica Institute, retirement expectations among non-retired individuals are shifting significantly. More than four in ten (42%) respondents plan to work well into their later years, with 22% expecting to retire at age 70 or older and 20% not planning to retire at all. In contrast, only 9% anticipate retiring between the ages of 66 and 69, while 20% expect to retire at the traditional age of 65. Additionally, 29% plan to retire before age 65. This data underscores a diverse range of retirement plans, reflecting both economic realities and personal preferences, and highlights the growing trend of extended working lives among older workers.

 

Retirement Plans and Savings

Nearly half (47.7%) of working-age adults are not covered by workplace retirement plans – a critical tool in saving for retirement – and inequities in retirement savings persist across income, race, and gender.

The report further elaborates on this issue by pointing out that inequities in retirement savings persist across several demographic factors:

1. Income: Studies show that workplace retirement participation rates tend to increase as annual earnings go up. This suggests that lower-income workers are less likely to have access to or participate in workplace retirement plans.
2. Race: The report indicates that there are disparities in retirement savings across racial groups, though specific details are not provided in the given excerpt.
3. Gender: Gender-based inequities in retirement savings are also mentioned, suggesting that women may face additional challenges in saving for retirement compared to men.

These findings underscore the critical role that employers play in helping workers build their retirement savings and overall financial health. The lack of access to workplace retirement plans for a large portion of the workforce, combined with persistent inequities, contributes to broader concerns about retirement security in America.

Employers can enhance retirement security by expanding access to workplace retirement plans and facilitating retirement savings, especially for low-income workers. Policies that strengthen Social Security and other social insurance programs are also crucial in improving retirement security for older workers.

Facilitating retirement savings through matching contributions, providing financial education, and offering catch-up contributions for workers over 50 can further boost employees’ retirement readiness. A particular focus on low-income workers, who are less likely to have access to workplace retirement plans, is crucial. Employers can design plans with lower minimum contribution rates or provide higher matching rates for lower-paid employees. Additionally, supporting policies that strengthen Social Security and other social insurance programs is vital for improving retirement security. While primarily a government responsibility, employers can advocate for such policies and offer supplemental insurance options to help employees bridge gaps in coverage. Implementing phased retirement programs can also help older workers transition gradually while continuing to save, addressing the disconnect between the 76% of employers who believe many employees plan to continue working in retirement and the mere 18% who offer formal phased retirement programs.

 

Support for Physically Challenging Jobs

Many older workers are locked in low-paying and physically demanding jobs until they are unable to continue working. These jobs are disproportionately held by low earners with lower educational attainment, and are predominantly workers of color.

According to the Economic Policy Institute (EPI), many older workers are locked in low-paying and physically demanding jobs until they are unable to continue working. These jobs are disproportionately held by low earners with lower educational attainment and are predominantly workers of color. The EPI report highlights that 50.3% of older workers have physically demanding jobs, 54.2% are exposed to unhealthy or hazardous conditions, and 46.1% have high-pressure jobs. This situation is particularly prevalent among workers with lower socioeconomic status, including those with lower educational attainment and workers of color.

A  Schwartz Center for Economic Policy Analysis (SCEPA) report found that “the share of older white workers whose jobs required significant physical effort decreased by 7% during the survey period— significantly more than the 1% decrease among older Black workers,” indicating that workers of color are more likely to remain in physically demanding jobs as they age.

For older workers in physically demanding jobs, additional support is necessary. This includes improving working conditions and providing employment assistance to help them transition to less demanding roles. Policymakers and employers should work together to create a supportive environment that addresses the unique challenges faced by these workers.

Providing employment assistance to help older workers transition to less demanding roles is a crucial strategy for enhancing their retirement security. Transition assistance can include job retraining programs, career counseling, and placement services tailored specifically to older workers. These programs can help workers move from physically strenuous roles to positions that are more sustainable, such as transitioning from manual labor to supervisory or administrative roles.

By facilitating these transitions, employers can help older workers continue earning income and contributing to their retirement savings, thereby extending their working lives. This approach not only benefits the workers by improving their financial security but also helps retain valuable experience and knowledge within the workforce. Additionally, it addresses the challenge faced by many older workers who are unable to continue in their current roles but are not yet financially prepared for full retirement.

 

The caregiver factor

Many caregivers reduce their work hours or leave the workforce entirely to fulfill caregiving responsibilities. This results in a loss of income and benefits, including retirement contributions. A study estimated that working caregivers lose a lifetime average of $303,880 in lost wages, benefits, and retirement contributions.

While 86% of employers say they help support their employees to achieve work-life balance, few have programs for employees who are family caregivers. Only 19% of employers provide an employee assistance program, and even fewer offer backup care or training to teach managers how to handle situations with caregiving employees (both 16%). This gap in support is significant, given that an estimated 20% of the U.S. workforce are family caregivers, according to a study by the Rosalind Carter Institute for Caregiving.

In addition, caregivers may face challenges in qualifying for Social Security benefits due to limited work history, which is often a result of their caregiving duties.

Despite these challenges, there is a positive outlook for employers who choose to support their caregiving employees. Research shows that creating flexible work options and a supportive workplace culture for caregivers not only helps employees manage their caregiving responsibilities but also yields significant benefits for employers. These benefits include increased employee morale, higher retention rates, reduced absenteeism, and improved productivity. 91% of CEOs believe empathy is directly linked to a  company’s financial performance. And research shows that engaged caregivers are likely to develop  “an enhanced capacity to anchor feelings in the present moment, resonate with others’ pain and emotions, and collaborate well with others. By supporting caregivers, employers demonstrate their commitment to the well-being of their employees, foster a positive company image, and attract top talent.

Employers can implement several strategies to support caregiving employees. These include offering financial support for paid caregiver services, flexible time-off policies, employee assistance programs that provide counseling and mental health support, and training for managers on how to handle situations with caregiving employees.

 

Conclusion

Employers have a vital role in building a supportive community that enhances the retirement security of older workers. By expanding access to retirement plans, offering transition assistance for physically demanding jobs, and addressing the specific needs of older workers, employers can create an environment that supports older workers’ continued participation in the workforce. Additionally, enhancing access to retirement plans and improving working conditions for those in physically demanding jobs are essential steps in ensuring a secure retirement for all older workers. Through these efforts, employers can help older workers achieve financial stability and enjoy a more secure retirement.

By modernizing their business practices, employers can help their employees extend their working years while they save and invest for retirement, ultimately improving retirement security among American workers.