Retirement Plans

Retirement Readiness Takes a Big Dip

Employers aren't able to move the needle in a positive direction on preparing workers for retirement.
David McCannMarch 28, 2018
Retirement Readiness Takes a Big Dip

The steps companies are taking to promote retirement readiness among employees don’t seem to be having much — or any — impact.

Despite the generally strong performance of financial markets, the proportion of employees with a positive outlook on retirement tumbled sharply between 2015 and 2017, according to research results released Wednesday by Willis Towers Watson (WTW).

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In 2015, 30% of surveyed workers said they expected to work past age 70. When the same question was asked of nearly 5,000 U.S. employees in the third quarter of 2017, the figure was up to 37%.

In the newest edition of WTW’s “Global Benefits Attitudes Survey” (a report released in November that didn’t include most of the results reported today), 57% of respondents said they believed they had enough financial resources to live comfortably 15 years into retirement. That was down from 69% two years earlier.

And only one in four workers (26%) said last year that they’d be able to retire before age 65, compared with 29% in 2015.

This trend of pessimism toward retirement should be a matter of concern for employers. “Our research shows that employees who work longer are typically less healthy, more stressed, and less engaged at work,” says Pat Rotello, a senior consultant at WTW.

Of course, the trend toward retirement non-readiness didn’t just appear out of the blue after 2015. And working longer is not just an expectation for the future but also a present reality.

WTW cited data from the Organisation for Economic Co-operation and Development showing that between 2000 and 2016, the proportion of U.S. men aged 65-74 who were still working climbed from 29% to 35%.

The same directional trend was evident in many other countries, including Australia, Canada, France, Germany, Ireland, Japan, the Netherlands, and the United Kingdom. In some cases the change was more pronounced than in the United States. For example, in Canada the proportion of people in that age group who were still working doubled, from 15% to 30%, over the 16-year period. In Australia, the corresponding figures were 18% and 31%, and in the U.K. 14% and 26%.

Employers, while professing to have good reasons for influencing retirement readiness, have some culpability for these trends.

Indeed, between 2001 and 2015 the value of retirement benefits as a percentage of pay, weighted by employer size, declined from 9.1% to 6.8%, according to WTW. Employers clearly shifted their benefits focus to health care: spending in that area, again as a percentage of pay, grew from 5.7% to 11.5% over that same 15-year period.

At the same time, employees are looking to their employers for more help. In WTW’s 2010 benefits attitudes survey, 56% of respondents said their employer-sponsored retirement plan was the primary way they were saving for retirement. By last year, that figure had risen to 73%.

To the extent that employers do try to influence workers to retire earlier, the survey results suggest that they might want to consider putting a slightly greater focus on women.

There’s a significant gender gap: 60% of working men ranked saving for retirement as a top financial priority, while only 44% of women said the same. In fact, saving for retirement was overall only the fifth-highest priority for women, who ranked meeting daily living costs and paying off debt as higher financial priorities.

Those results, though, don’t reflect women’s views on whether it’s important to save for retirement, according to WTW. Rather, they reflect a larger population of women who don’t think they’ll be able to retire when they want to. That’s clear, considering that married women without any children under 18 selected saving for retirement often as a top financial priority.