For most employees, the responses from their employers on whether they should retire or not are mixed, which creates confusion on whether they should stay or go. 55% of U.S. employers surveyed by MetLife Inc. prefer older workers to retire to give room for younger employees to advance while the other 45% said they want older employees to delay retirement to enable a smooth transfer of expertise, skills, and knowledge to younger colleagues.
Managing contradictions — and retirement contributions
Based on the findings of the survey by MetLife, the main source of contradiction in employers’ position when it comes to retirement is differences in the level of skills, knowledge, and experience between companies. For one, employers with a deep pool of talent would not mind letting older employees go. On the other hand, companies that lack a wide array of skills and expertise across different levels and age groups within their workforce will be more reluctant to allow older staff members to retire before they pass along their skills to the future of the company.
Even though employers view retirement in terms of their workmanship-needs, a vast majority recognize that employees’ decision on when to retire is influenced immensely by retirement benefits. According to the MetLife survey, 96% of employers agree that the decline of defined benefit pensions has resulted in an overreliance on defined contribution plans as a source of income during retirement.
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Retirement savings lost to risky ventures compounds issue
Over the past two decades, retirement plan schemes have shifted from the rigid defined-benefit plan to the more flexible defined-contribution plan as longevity places more financial burden on employers on top of investment risk that they bear. The answer to whether employees should retire or not is increasingly becoming blurred as more employers thrusting the burden and risk to employees. With more employees investing and losing their contributions to risky ventures, the financial stability provided by delayed retirement is important today than ever before. According to the survey, 88% of employers and 95% of employees agreed that it is important to provide retirees with a source of income that they cannot outlive.
Longevity a “threat” to retirement security?
Although a longer life is of outermost importance, it enhances the possibility that retirees will outlive their source of income. Delayed retirement enhances the financial security of employees, according to a report by the Stanford Center on Longevity and Society of Actuaries. With 87% of employees viewing increasing longevity as a threat to their retirement security, delayed retirement is poised to increase with time. Unfortunately, a majority of employees who delay their retirement will do so as a last course of action to protect their financial security in retirement. This assertion is evidenced by the findings of the survey that 81% of employers acknowledge that financially trapped workers are delaying their retirement.
Delayed retirement will increase as lifespan increases with 57% of employers expecting future employees to retire at a later age than current workers, according to the MetLife survey. The respondents anticipate an increase of around 1.6 years on average in their workers’ retirement age 64.5 currently to 66.1 in five years. The survey also revealed that of the employee respondents, 9% said they never expect to retire and 19% don’t know when they will retire. But among those who do expect to retire, the outlook is a little more optimistic than the employer respondents. Even though 63.8 years is the expected employees’ average retirement age, 43% said they expected to retire at 65 or older with 21% of employees over 55 years having already delayed their retirement by an average of 4.4 years.