Planning is Key to Independence in Retirement
A recent Wall Street Journal article attempted to dispel the myth of an impending retirement crisis in the United States (Biggs, 2019). The facts conveyed included that most private sector employees are well prepared for retirement; having saved and invested for many years with both employer-sponsored plans and Individual Retirement Accounts. Recent data indicates that 61% of workers and 80% of married couples now participate in a defined benefit plan. Employer sponsored plans and IRA accounts have been growing at record levels (Biggs, 2019). Employers have played a role in the improved overall retirement picture as many have become more generous in their support of their defined benefit programs for their employees. With unemployment rates at historical lows, this trend is expected to continue as retirement programs have become significant influencers on recruitment and retention strategies for many employers. If this positive assessment is true then, what is the cause of the media hysteria regarding retirement?
The World Economic Forum reports that 85% of the retirement gap in the U.S. is due to government underfunding of public pensions. This means that while Americans in the private sector have continued to increase savings and employers have expanded their support of 401k and other private retirement plans, the government managed retirement plans are in disarray. While private sector employers have encouraged and trained their employees to use the 401k benefit, many public employees are not offered the same level of communication and training on saving and investing for retirement. Rather, they are expecting that their needs will be met through their government pension plan. As a result of the contrasting philosophies, we are expanding into two entirely different employment cultures where those employed by a public sector entity are anticipating the “promise” of a pension and those accustomed to managing their own retirement planning, are positioned to support themselves in retirement. This different mindset begins early and, could result in different perspectives and expectations of government.
One might question how employers became involved in the retirement of their employees; a point in time that occurs after they leave the job, and why they would decide to embrace that idea. What level of responsibility does an employer have to prepare their people for retirement? During market shifts from defined contribution to defined benefit, many employers accepted a role in offering retirement programs, but rather than providing an income, they have become the educator and trainer; leading employees towards conscientious retirement planning, building good habits along the way. Employers in wide ranging industries often will offer training or access to financial and retirement planning information to help guide their employees into making good decisions as it relates to finance and retirement. They do this, not because it is mandated, but because it makes good sense. It is good business to encourage self-responsibility and independence, while providing tools to meet that end.
While the private sector has continued to experiment with benefits that improve the lives of their employees, the public sector has largely depended on the antiquated, and unfunded, pension system. The concern this raises, of course, is that the unfunded liabilities will result in many people not being provided with the retirement that they were promised during their employment. Alternatively, the private sector may be “asked” to participate in the support of public sector employees in order to ensure that there truly is no “retirement crisis”.
Retirement is the wild card of the personal life cycle. No one can be certain what those years hold and there are more potential pitfalls than in the other stages of life. An evolved civil society should care for the weakest among us certainly including our elderly. Those in their earlier years can still recover from lost income or recoup from a broken promise. They can still go back to work and earn income. Many elderly people are beyond those abilities and have very few options for increasing their income. While we can still hope that public pensions will become funded at the necessary levels in the future, it may be wise for all Americans to save and plan for their own retirement. Small employers, particularly, may find it difficult to provide life skills training and personal development when taxed with just keeping up with job skills and job training for their employees. Those employers in the private sector already leading in this area can be a resource for other organizations who do not have the expertise or resources to train their employees on retirement basics.
The difference between retirees in the future may be their choice of employer in the past. It may be that the public sector employees will be expected to accept some partial amount of the income expected or they will need to work longer than planned. All retirees should have the opportunity to enjoy the fruit of their labors and the delayed gratification after years of toiling. All retirees should benefit from their contributions with a safe and secure series of golden years. No one wants to see elderly people living in poverty and pain. While no one person or employer can change the dire situation that the government pension system seems to find itself in, we can consider self-reliability and individual and community resources. To some degree, the public sector crisis can be mitigated for the individual by taking ownership of our own retirement planning. Regardless of the support we think we should be getting from a government entity, social security included, it may be best to consider our own accountability and prepare be individually responsible for our own ending years. That may take some serious discipline during early employment.
The dependence on government retirement programs may be one of the factors influencing the population more willing to accept a system of control and dependence; contrary to our national culture. Before this outlook takes further root in our society, we should consider reflecting on the importance of independence and nature of freedom. Careful, thoughtful planning and a sense of self responsibility may be the way individual Americans overcome the potential aggregate crisis. Employers of all sizes can influence the lives of their employees well beyond the years of employment. That employment bond can continue and dividends result in goodwill that can manifest itself in things like recommending the employer to friends, families and neighbors, and speaking highly in the community. Beyond the business benefits, just knowing that, as an employer, you guided your employees towards a fulfilling retirement can be gratifying in and of itself.
Biography: Eileen L. Griffin has over 20 years of management experience. She holds an MBA and is currently a Doctoral student at Gonzaga University, School of Leadership Studies.
Required Disclosure: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual.
