{"id":12547,"date":"2020-12-01T18:36:23","date_gmt":"2020-12-01T18:36:23","guid":{"rendered":"https:\/\/insulation.org\/io\/?post_type=articles&p=12547"},"modified":"2021-01-04T18:36:40","modified_gmt":"2021-01-04T18:36:40","slug":"pandemic-heightens-need-for-retirement-planning","status":"publish","type":"articles","link":"https:\/\/insulation.org\/io\/articles\/pandemic-heightens-need-for-retirement-planning\/","title":{"rendered":"Pandemic Heightens Need for Retirement Planning"},"content":{"rendered":"

\"\"<\/a><\/p>\n

The COVID-19 pandemic has wreaked havoc everywhere, even on retirement plans. While the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided important financial relief by allowing people to withdraw or borrow more money from their retirement plans1 <\/sup>without penalty, the negative effect of these withdrawals on future retirement income is likely to be significant.<\/p>\n

Given the ongoing volatility in the financial markets, chances are good that plan participants\u2019 needs will keep changing. The challenge for employers is to find ways to make sure retirement planning feels accessible and relevant to employees.<\/p>\n

In the best of times, \u201cretirement planning is an intimidating topic,\u201d said David Fairburn, Associate Partner in Retirement Solutions Practice with consulting firm Aon in Los Angeles, California. \u201cEmployees have more immediate concerns, and it can be hard for them to take action if the topic feels too overwhelming.\u201d<\/p>\n

Here are four areas where retirement planning experts advise fresh thinking to help workers save for their golden years.<\/p>\n

Help Employees Save for Emergencies and Retirement<\/h2>\n

The pandemic showed how much at risk retirement funds are, as financially strapped retirement plan participants withdrew money from their 401(k) plans to pay their bills. Employees who earn good salaries but have limited savings also borrowed from their plans, according to a survey by Edelman Financial Engines, a provider of financial advice. More than a quarter of the 2,000 respondents\u2014who were ages 40 to 65 and had annual household incomes over $100,000\u2014made early withdrawals from their retirement plans due to the pandemic. They said they expect it will take 6 years to regain those funds.<\/p>\n

When employees feel compelled to raid their 401(k)s, it is a sign that they need help planning for financial emergencies. According to a Voya Financial\u00a0study of 63,000 retirement plan participants, individuals without an emergency fund that is\u00a0equal to at least 3 months of living expenses were 13 times more likely to take a hardship withdrawal from their retirement plan than those with a fully funded emergency fund.<\/p>\n

\u201cIf employers can help employees establish an emergency fund with liquid assets that they can use in the short term, that can help lead to greater retirement fitness in the long term because employees will be less likely to use their retirement plan assets for those needs,\u201d said Jeff Cimini, Senior Vice President of Retirement Product Management at Voya Financial in Windsor, Connecticut. To encourage participation and savings, employers can offer access to emergency savings accounts funded through payroll deductions2 <\/sup>and provide an incentive to participate, such as offering to match a certain amount of employee contributions to these accounts.<\/p>\n

Leverage All Available Tools and Resources<\/h2>\n

The first place to look for retirement planning support is existing retirement plan vendors. Digital financial platforms, education, budgeting guidance, emergency savings accounts, and financial wellness resources can all help start the conversation about\u00a0retirement planning and how it fits into the employee\u2019s overall finances. Ideally, any advisors or coaches would incorporate the employer\u2019s benefit offerings into these discussions.<\/p>\n

The advice can be \u201ctailored to the benefits that are available to the employee\u00a0in addition to general education about financial issues,\u201d Mr. Fairburn suggested. \u201cThe key is to start the conversation and help get employees on the right path.\u201d<\/p>\n

Automatic retirement plan features, such as automatically enrolling new hires into the plan, and annually increasing the percentage of pay workers contribute, can also ease the decision-making burden on retirement plan participants.<\/p>\n

\u201cThe role of the employer is to be the biggest cheerleader for retirement planning,\u201d Mr. Cimini said. \u201cPlan designs like auto-enrollment can lead to much higher participation rates and makes it easier for participants to reach their retirement targets for
\ntotal savings.\u201d<\/p>\n

Focus on Health Care Costs<\/h2>\n

As employees approach retirement age, they will need specific information and guidance on critically important topics, such as retiree health care costs. Consider these\u00a0relevant issues:<\/p>\n

    \n
  • How can employees plan for health care costs during retirement?<\/li>\n
  • What should they do about health insurance until they are eligible for Medicare at age 65?<\/li>\n
  • How can they leverage in retirement what they have accumulated in a health savings account (HSA)?<\/li>\n<\/ul>\n

    \u201cMore employers are focusing communication around integrating HSAs with long-term retirement savings,\u201d said Steve Vernon, a Research Scholar with the Stanford Institute on Longevity in Palo Alto, California. \u201cThere is the potential to use HSAs to fill in gaps in retirement planning.\u201d<\/p>\n

    Retiree health care costs should also factor into discussions with younger employees, who may choose to use some HSA funds for immediate health care costs and save others for use in retirement.<\/p>\n

    Move from Retirement Saving to Retirement Income<\/h2>\n

    Retirement planning should support employees as they face decisions such as:<\/p>\n

      \n
    • When to start claiming Social Security benefits,<\/li>\n
    • How inflation and longevity affect retirement security, and<\/li>\n
    • Whether they want or need to work part time during their retirement.<\/li>\n<\/ul>\n

      \u201cThis is about planning financial security for 20 or 30 years,\u201d said Mr. Vernon, who contributed to a series of essays on retirement planning for the Society of Actuaries.3 <\/sup>\u201cThey need to know what to expect in retirement and what steps they can take to trigger good decisions about retirement.\u201d<\/p>\n

      If they work in a public-facing job, some older workers may be contemplating early retirement because of the health risks from the pandemic. In this case, those employees need to make sure they know and understand the consequences of retiring early. Social Security claiming strategies can show employees the financial effect of receiving payments starting at age 62 instead of waiting until full retirement age, or until age 70, to receive maximum benefits. This is also the time for employees to explore the pros and cons of using their plan assets to purchase an annuity for retirement income to supplement Social Security benefits.<\/p>\n

      Finally, there is the role of work during retirement to consider: Employers that offer part-time work for older workers can provide information on potential opportunities during retirement planning.<\/p>\n

      References
      \n1. SHRM, How the CARES Act Changes Health, Retirement and Student Loan Benefits: www.shrm.org\/resourcesandtools\/hr-topics\/benefits\/pages\/how-the-cares-act-changes-health-retirement-and-student-loan-benefits.aspx
      \n2. SHRM, Emergency Savings Accounts Funded by Payroll
      \nDeductions Boost Financial Wellness: www.shrm.org\/
      \nresourcesandtools\/hr-topics\/benefits\/pages\/emergency-savings-accounts-funded-by-payroll-deductions-boost-financial-wellness.aspx
      \n3. Society of Actuaries, \u201cRedefining the Goal of Retirement Planning\u2013Essay Collection\u201d: www.soa.org\/globalassets\/assets\/files\/resources\/essays-monographs\/2020-redefining-goal-retirement.pdf<\/p>\n","protected":false},"excerpt":{"rendered":"

      For many, the pandemic has had a catastrophic financial effect, sending people to dip into retirement plans well before they ever imagined. Even those in better financial positions are not necessarily building up retirement resources these days. This article discusses four key areas of planning to help position you and your employees for a healthy retirement.<\/p>\n","protected":false},"author":[529],"featured_media":0,"template":"","categories":[526],"class_list":["post-12547","articles","type-articles","status-publish","hentry","category-december-2020","author-joanne-sammer"],"acf":[],"yoast_head":"\nPandemic Heightens Need for Retirement Planning - Insulation Outlook Magazine<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/insulation.org\/io\/articles\/pandemic-heightens-need-for-retirement-planning\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pandemic Heightens Need for Retirement Planning\" \/>\n<meta property=\"og:description\" content=\"For many, the pandemic has had a catastrophic financial effect, sending people to dip into retirement plans well before they ever imagined. 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