Employees often view retirement as a capstone to their careers. It’s a time to pursue personal interests after decades of professional dedication.
However, many encounter unexpected challenges on their career journey. Retirement itself may come sooner than expected.
According to Manulife John Hancock Retirement, 62% of retired Americans stopped working earlier than planned. This trend can have significant implications for employees and employers.
Early retirement reduces employees’ time to save and increases the years they’ll need to rely on their savings. Individuals counting on working longer may find themselves struggling to achieve retirement security. According to 401(k) Specialist Magazine, 72% of people who retired earlier than anticipated wish they had saved more. This figure compares with 47% of individuals who retired as planned or later.
As an employer, you have an opportunity to support employees on their road to retirement. By addressing challenges throughout their careers, you can build a stronger, more engaged workforce.
Reasons behind early retirement
401(k) Specialist reports that employees expect to work four years beyond their ideal retirement age. Instead, studies show that nearly 67% of retirees stop working earlier than planned.
The weekly journal Business in Vancouver reports that employees retire early for various reasons. Factors include:
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Health issues. Chronic illnesses and unexpected medical problems cause many employees to leave the workforce earlier than planned.
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Job loss. Layoffs and downsizing may disrupt retirement plans. Unexpected career gaps can make it challenging for employees to find work and maintain their previous salaries.
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Caregiving responsibilities. Many individuals leave their jobs early to care for aging parents or loved ones. But doing so can derail retirement savings and planning.
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Lack of financial understanding. Some employees retire too soon because they underestimate their retirement costs and needs. Once they leave the workforce, it can be challenging to reenter.
Research underscores the need to address employees’ financial concerns sooner rather than later. According to 401(k) Specialist:
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50% of employees report feeling behind on their retirement savings goals.
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Around 50% say their debt levels are worrying.
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Nearly 50% are concerned about affording basic expenses and health care in retirement.
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45% worry about building adequate emergency savings.
According to Manulife John Hancock Retirement, 41% of employees say their finances are fair or poor. Just 22% say their financial situation is very good or excellent. This challenge creates an opportunity for you to improve the economic well-being of your workforce.
Employer solutions to boost retirement readiness
Helping employees prepare for retirement does more than improve individual well-being. It also strengthens workforce engagement, productivity and organizational reputation.
The following strategies can help you boost employees’ retirement readiness.
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Engage employees in your retirement plan.
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Provide financial education.
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Connect employees to financial professionals.
Engage employees in your retirement plan
Engaging employees in your retirement plan can significantly improve retirement preparedness. According to Manulife John Hancock Retirement, employees who actively read plan communications and explore plan websites report higher levels of financial wellness. To increase engagement:
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Assess your retirement plan design for tools that let employees model retirement savings and scenarios.
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Offer retirement calculators and resources that help employees understand their current and projected savings.
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Provide insights into investment options tailored to risk tolerances and retirement timelines.
Interactive, easy-to-use tools help employees manage their retirement goals.
Provide financial education
Lack of financial knowledge is a common barrier to retirement readiness. Financial education can help employees better understand their finances.
Offer workshops and resources on various financial and retirement topics, including:
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Budgeting strategies
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Debt management
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Higher education and housing expenses
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Retirement health care
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Emergency savings
Manulife John Hancock Retirement highlights the need to educate employees on longevity risk. Because many individuals can expect to live 20 to 30 years after retiring, retirement savings and planning should account for longer lives.
Retirement readiness education can also go beyond finances. Topics may include mental health, lifestyle changes, social connections and emotional resilience.
Connect employees to financial professionals
401(k) Specialist Magazine says less than 33% of employees have a formal retirement plan. Connecting employees to financial professionals lets them access personalized retirement planning and information.
Financial experts can customize employees’ retirement plans based on:
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Financial status and savings goals
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Health history and expected medical costs
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Family obligations and caregiving needs
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Personal interests and lifestyle factors
Tailored advice helps employees create realistic goals for when to retire and how much to save.
Organizational benefits of supporting employees
Helping employees prepare for retirement sets them up for individual success. It can also strengthen workforce planning, attraction and retention efforts.
The financial wellness platform Bridgeover says lowering employees’ financial stress improves productivity, career development, turnover rates and health outcomes.
For more information on retirement benefits, talk to your insurance broker or benefits adviser. They can help you assess your plan design, explore new tools and implement resources that support your employees’ retirement security.
