It may not seem like your problem if your employees aren’t ready to retire, but in the long term it could be bad news for your succession planning and organizational success. Why should you care and what can you do to help?
If baby boomers’ retirement savings aren’t adequate then they are not going to retire, which means a lack of healthy turnover to create jobs for younger workers. There is evidence that we’re already seeing some of this effect in youth unemployment rates, and for organizations which rely on innovation and new ideas it’s vital to have a certain amount of turnover to bring in new workers.
While delayed or progressive retirement can be a positive in that it keeps knowledge and experience in the workplace, organizations need to balance that with the need for younger workers.
Helping employees manage financial stress is also a productivity tool. A Desjardin Financial survey found 60 per cent of people considered financial problems their number one stresser, with some spending up to an hour a day at work managing personal finances.
According to Buck Global Investment Advisors senior consultant Robin Pond, CFA, the shift away from defined benefits plans has put pressure on potential retirees, who are not confident that they will have enough income to live comfortably.
“Because so much responsibility has been shifted onto the employees there is a greater requirement for the company or the HR department to provide assistance in this area,” Pond said. “The employer has a strong role in education and communicating what’s available and providing financial planning tools to employees.”
Making a qualified financial advisor, such as a CFA charterholder, available to employees can help them discuss investment strategies, contribution rates, and lifestyle expectations. One of the major issues advisors are seeing is people with unrealistic expectations or not knowing how much they will require to live comfortably in retirement.
“At the end of the day no one is saying it’s not the employee’s responsibility, but without the employer’s assistance some people will struggle,” Pond added. Financial planning can also help employees who have left their saving late in life. Standard wisdom is that older savers should be more conservative, but this is balanced by lower returns and an advisor can help employees balance risk and return to improve their own position.
“You really need to have a realistic approach to these things,” Pond said. “A big part of it isn’t just investments and how much you’re going to earn. It has to dovetail with the lifestyle that people expect and can achieve in retirement – when they’re going to retire, whether they should save into retirement and have partial income after a certain point.”
Offering financial planning is not only good for baby boomers, it can benefit employees of any age. Many Generation X employees are struggling with competing needs such as mortgage payments, student loans and other debt, supporting children and parents, and trying to save for retirement.
“There are a lot of factors that you have to tie in together,” Pond added. “The decisions aren’t made in isolation but with an awareness of the overall plan that has a lot of other factors to it.”