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The Realities of Retirement

If there’s one thing your employees can count on, it’s change. Clientele come and go, staff assume new roles and responsibilities, procedures get updated, the list goes on. And yet amid the changing tide of staffing and business building is one milestone everyone on your team will one-day hopefully reach: retirement.

Saving for the long term is a tricky concept. On the one hand, most of us know that preparing for retirement is important. And at the same time, many of us aren’t preparing at all. That’s because there are some realities about retirement that make planning difficult. Data shows that “fewer than half of Americans are confident that their savings will be enough, and another 55 percent don’t feel secure in their retirement planning.”1 On top of that, a single source of income like Social Security will not be enough. In fact, the latest figures project that Social Security funds will run out in 2035.2

If funds aren’t readily available to save, that puts more of your employees in a predicament. Don’t worry — at Portico, we’re ready to help you reach employees on this important topic with education on common misconceptions about retirement planning

Retiring… Then Unretiring?

As we all know, the pandemic had an enormous impact on the workforce. Your organization may have said farewell to longstanding employees who headed into retirement early. Now, according to recent research from Indeed Hiring Lab, rates of “unretirements” — retirees returning to the workforce — are on the rise.3

There are a few reasons for this trend. Likely diminishing concern of COVID exposure is one reason; however, for some workers, rising costs could also be a key factor.

The age to retire may differ from person to person, and it can also change! Life expectancy is a huge unknown. Historically, age of retirement depended on when you could collect Social Security or other benefits but now it seems to have a lot more to do with how robust a person’s/couple’s savings is or whether or not continuing to perform the work is possible. With inflation on the rise, studies show that many Americans are intentionally delaying retirement efforts.4

The recent EBRI/Greenwald Research Retirement Confidence Survey of more than 3,000 American retirees and workers aged 25 and older confirmed how important it is to adjust our anticipated age of retirement throughout the planning years. In 2021, “about one in four workers adjusted the age at which they plan to retire, including 17 percent who now plan to retire later and 6 percent who plan to retire earlier.”5

In Retirement, More Income Needed

The reality is, employees may need more income in retirement than originally thought. While some expenses may decrease in retirement, like the need for professional attire or on-the-go meals, others like health care costs are known to go up. Consider this: Fidelity’s Retiree Health Care Estimate found that a couple both aged 65 in 2022 will need approximately $315,000 to cover medical expenses throughout retirement years.6

In addition to health care expenses, the most common reasons retirees need to plan for higher income during retirement include:

  • Living longer than expected
  • Investment decisions and allocations
  • Cost of long-term care
  • The timing of retirement account withdrawals
  • Cost of inflation7

The last of these reasons, inflation, is one they need to be aware of — the combination of rising interest rates, rising prices and rising inflation are sure to be impacting your employees. Even the best laid plans are upset by uncontrollable factors in the market. For employees who understand what inflation is, they may be feeling some anxiety. However, it’s not necessarily reason to panic. Overcompensating for inflation by taking on too much risk in their investment choices may be the bigger risk than inflation itself, according to some experts interviewed by Forbes.8

While we don’t know exactly what the future holds, your employees can’t afford to wait to find out. For a comfortable retirement, consistent saving is key. Whether they dream of a slower pace, time to volunteer or care for grandchildren, or get the travel bug, it all takes strategic planning.

Helpful Online Tools for Employees

So how do we educate and give employees ways to understand how they’re doing? Here are some complimentary online tools from Fidelity you can share with retirement plan members to get them thinking about long-term planning:

  • Power of small amounts: Shows how even little changes to contribution amounts, such as 1 percent, can have an impact.
  • Fidelity Retirement ScoreSM: Provides a snapshot of how a person is doing based on current age, income and retirement balances.
  • Retirement Income Calculator: Explore ways to see how much money you could have every month, using a mix of predictable income and savings.

Annual Enrollment Reminders

Annual enrollment begins in the fall. If you’re not currently offering retirement options to employees, but are interested, please contact your Portico relationship manager to find out more about our retirement offerings.

As an employer who cares deeply about its employees, we want to help you provide workers with the best in benefits. And when it comes to retirement savings, every little bit counts!

1Alan Goforth, Who Doesn’t Want a Comfortable Retirement? Workers Just Don’t See How They’ll Be Able to Afford It, BenefitsPRO, Retrieved June 14, 2022 from https://www.benefitspro.com/2022/03/23/who-doesnt-want-a-comfortable-retirement-workers-just-dont-see-how-to-afford-it/

2Mark Hulbert, Don’t Ignore the Bad News in the Latest Actuarial Analysis from Social Security, Marketwatch.com, Retrieved June 14, 2022 from https://www.marketwatch.com/story/dont-ignore-the-bad-news-in-the-latest-actuarial-analysis-from-social-security-11654276614

3Nick Bunker, ’Unretirements’ Continue to Rise as More Workers Return to Work, Hiring Lab, Retrieved June 14, 2022 from https://www.hiringlab.org/2022/04/14/unretirements-rise/

4Carmen Reinicke, Twenty-Five Percent of Americans are Delayed Retirement Due to Inflation, Survey Finds,” CNBC.com, Retrieved June 14, 2022 from https://www.cnbc.com/2022/05/31/25percent-of-americans-are-delaying-retirement-due-to-inflation.html

52021 Retirement Confidence Survey, EBRI and Greenwald Research, 9.

6Fidelity Retiree Health Care Cost Estimator, Retrieved June 14, 2022 from
https://www.businesswire.com/news/home/20220516005224/en/Fidelity-Releases-2022-Retiree-Health-Care-Cost-Estimate-65-Year-Old-Couple-Retiring-Today-Will-Need-an-Average-of-315000-for-Medical-Expenses

7You May Need More Income Than You Think, Portico, Retrieved June 14, 2022 from https://myportico.porticobenefits.org/retirement-center/planning-for-retirement

8Bob Sullivan and Benjamin Curry, Inflation and Retirement: What You Need to Know, Forbes.com, Retrieved June 14, 2022 from https://www.forbes.com/advisor/retirement/inflation-retirement-investments/#:~:text=According%20to%20a%20recent%20survey%2Crising%20inflation%20on%20your%20retirement.