After using their 401(k)s as a piggy bank, workers fret for the future

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What are American workers most concerned about when it comes to retiring? Why do so many employees continue working past the age of 65? Another question that employers, employees and benefit advisers ask these days: Can retirement really happen? Employee Benefit Adviser recently spoke with Catherine Collinson, the CEO of Transamerica Center for Retirement Studies about its recent survey of American employees and their concerns for their retirement years and how they will pay for it. The following is an edited and condensed version of our interview with Collinson.

Employee Benefit Adviser: You found that 62% of American workers are confident they will be able to retire with a comfortable lifestyle. That would mean slightly more than one-third of respondents are not confident they will retire comfortably. What are they most concerned about?

Catherine Collinson: Saving rates are not where they need to be. When we ask workers about their greatest retirement fears, one response that is often at the top of the list is “outliving my savings and investment.” Workers are also concerned about the future of Social Security. And last but not least, declining health in our older years and the healthcare cost associated with that declining health [are major concerns].

EBA: What are employees’ expected sources of income in retirement? What are their financial priorities?

Collinson: We have done our survey long enough that we are seeing changes in the retirement landscape, especially generation by generation. The time frame that we are born actually has tremendous influence in terms of our main sources of retirement income.

One interesting wrinkle is that a lot of people simply see working, income from some sort of continued work, as an important source of income when they retire. This was a question that we would not have thought to ask 10 years ago.

EBA: Let’s talk about retirement plan leakage: 29% of all workers have taken some form of loan or withdrawal from their retirement plans. Do you see this as a challenge for their future retirement? Are they able to pay back?

Collinson: I lose sleep over this. I actually lose sleep over a lot of the survey findings. Our research illustrates that workers are at risk. Leakage from retirement plans in the forms of loans, early withdrawals, including hardship withdrawals, can severely impact the growth of a nest egg at retirement age. It’s really hard for people to recover from that once they have done it.

EBA: Your study concludes that all workers see healthcare benefits as their most valued benefits offered by their companies. This is followed by access to an employee-funded retirement plan such as a 401(k) or IRA. Why do you think this is and what can employers do?

Collinson: It is really important for employees and benefits professionals to remember, which most already do, the tremendous value that workers place over employer benefits. Healthcare benefits, retirement benefits… Workers are actually very savvy in terms of considering those benefits as part of their overall compensation package.

Healthcare benefits, I think it is self-explanatory why they are so important, especially at this day and age where it can be very costly if you need medical attention, without good benefits.
Retirement benefits, workers also see as really important to the extent that most say the presence of retirement benefits will be a major factor when choosing an employer or a job offer.

Many, especially millennials, said all things considered, if they could work for an employer in a similar job, similar arrangements, that offered better retirement benefits, they would consider switching. So, benefits really are vital for employers attracting and retaining talent.

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