Employer priority: Help employees with retirement planning through pandemic

April 22, 2021
virtual meeting with employees' head shots (Photo: Shutterstock)

One year into the COVID-19 pandemic, business leaders remain focused on helping employees manage the impact of recent market volatility on their retirement plans, according to the latest quarterly Principal Retirement Security Survey.

“The latest findings showcase employers’ continued dedication to supporting their employees’ retirement readiness, as well as their overall financial wellness,” said Sri Reddy, senior vice president, retirement and income solutions, at Principal Financial Group. “This is all while managing the challenges of running their businesses during a global pandemic and a market environment they remain cautious about.”

Among the report’s key findings:

Economic outlook remains cautious. The majority of U.S. employers surveyed have remained committed to providing benefits and financial resources throughout the pandemic to help employees manage savings and income in retirement. COVID implications are top of mind for employers, with many reporting concerns about its long-term financial impact.

More than half of employers express caution regarding the economic outlook for the next year. This is a shift from July 2020, when 40 percent of employers expressed caution.

Employers are concerned about how their employees will fare in retirement, as well as talent retention and attraction. They shared the top reasons they continue to offer retirement plans, despite challenges posed by COVID:

  • To encourage employees to save for retirement (74 percent).
  • To help provide financial security to employees in retirement (70 percent).
  • To help retain current employees (60 percent).
  • To help employees have enough income in retirement to live comfortably (60 percent).

Half of employers are concerned that their employees are not planning enough to manage their savings and income in retirement. Just 16 percent of employers feel most of their employees are saving adequately for retirement.

  • Almost 40 percent of workers are concerned about outliving retirement savings.
  • Nearly half of workers say they either don’t understand retirement income strategies or haven’t decided on an approach.
  • However, 70 percent of workers say they are interested in investment options within an employer-sponsored retirement plan that includes a guaranteed lifetime income solution.

More than half of employers expressed a desire to make retirement income options available to plan participants.

  • Roughly 40 percent want to actively encourage plan participants to elect retirement income solutions.
  • More than 35 percent encourage retirement income solution utilization by as many plan participants as possible.

“Effective employee engagement can help workers prepare for retirement,” Reddy said. “In addition to financial wellness education, we actively encourage the adoption of auto features, including plan re-enrollment, as well as retirement income solutions. Connecting workers with the right resources and plan features can help them recognize their options and feel more secure about their path forward.”

When it comes to employees boosting their retirement readiness, employers highlight several opportunities for improvement.

  • Review expected health-care costs in retirement (nearly 70 percent).
  • Create a retirement income plan (nearly 70 percent).
  • Determine how to manage multiple retirement accounts (65 percent).
  • Identify if they will have enough income in retirement from guaranteed sources (57 percent).

Employers see retirement readiness as an important part of overall financial wellness. Employers report that if they could encourage their employees to take action in 2021 to improve their financial health, they would focus on increasing employee savings rates or deferral percentages within the retirement plan (37 percent) and help employees start saving in the plan offered, if eligible (31 percent).

Complete survey results are available at Principal’s site.