Quick look: Retirement never strays far from the topic of conversation, even among those newly entering the workforce. But not every generation views it the same. A recent Transamerica study explores how Gen Z is preparing for retirement, how it differs from older generations, and ways brokers can help their clients adjust their benefits to accommodate all.
For the first time in modern history, there are five generations in the workforce. This novelty has led the Transamerica Center for Retirement Studies and Transamerica Institute to take a closer look at the generational spectrum as it pertains to retirement benefits.
The study highlights the fact brokers and employers must acknowledge and respond to the differences in expectations when it comes to retirement plans. For instance, a Gen Z worker likely has a vastly different viewpoint about their savings for the future than Baby Boomers ready to retire. There’s also a need to reflect on the silent generation of employees in their late 70s and early 80s who’ve bypassed retirement and continue to work.
Yet, despite the differences, the one thing every generation can agree upon is retirement plans are a must-have job benefit. What those plans entail and what the expectations for employees are generation to generation is a different story. With the help of a professional employer organization (PEO) partner, brokers can use these insights to help clients as they shape their benefit strategies.
How retirement perceptions differ between generations
Each generation faces challenging circumstances affecting their outlook on retirement. From the impact of COVID-19 on Gen Z, to the transition Baby Boomers are experiencing as many continue working longer, the study provides a breakdown on where each group stands.
According to the study, over 50% of Gen Z workers report experiencing a negative employment impact due to the pandemic. However, they’ve also started saving for retirement early, at the median age of 19, and will have greater accessibility to 401(k)s and other retirement plans than previous generations. Therefore, regardless of unprecedented challenges, the newest generation to enter the workforce has more time to recover from setbacks and recalibrate their saving strategies.
After also experiencing a volatile economy upon entering the workforce, Millennials have added second jobs and/or side hustles as part of their retirement plans. The need for more income is a result of many falling behind on saving as they face higher levels of student debt and struggle with juggling work, raising children, and/or caring for aging parents. The study reveals 40% are serving (or have served) as a caregiver to a relative or friend during their career.
Meanwhile, many Gen X workers didn’t have access to 401(k)s upon first entering the workforce, as the concept was relatively new. They also had limited investment knowledge or opportunities to prepare for their future. As a result, 80% of today’s Gen Xers are concerned Social Security will not be available for them upon retirement, and 50% expect self-funded savings will be their primary source of retirement income.
As for the Baby Boomer generation, retirement savings began to switch from pension plans to 401(k) offerings, though they didn’t start saving until much later in life (median age 35). Now, 49% expect to work past age 70 or don’t plan to retire as a way to contribute to their income. But fortunately, 66% say their employer provides age-friendly opportunities to set them up for retirement success.
The universal demand for employer-sponsored retirement benefits
Though percentages and concerns shift between generations, 91% of all workers value a 401(k) or similar retirement plan, with 82% agreeing retirement benefits are a major factor in their final decision when considering employment.
76% of workers report access to a 401(k) or similar employee-funded retirement plan; though 18% of workers are not offered any type of retirement benefits. Here’s an opportunity for brokers to recommend long-term financial wellness offerings, in addition to retirement savings alone, to their clients.
Traditional retirement savings plans may still be the number one benefit choice, but there’s a growing need for a wider array of options, which a PEO partner can provide to better prepare broker clients for retirement.
Financial wellness opportunities available through a PEO
A PEO partner like ExtensisHR works collaboratively with broker clients to recognize areas where they can provide more financial wellness support beyond a 401(k) or other standard type of retirement savings plans. This can help businesses diversify their benefits and speak to a multigenerational workforce as they look for ways to save for their future. Opportunities for support may include:
Comprehensive health and wellness programs
Employees want a broader scope of benefits beyond traditional medical health plans and 401(k)s. Therefore, offerings like financial wellness and employee assistance programs, long-term care insurance, and a greater focus on workplace wellness are valuable.
New provisions under the SECURE 2.0 Act may qualify an employer-sponsored retirement plan to include matching contributions based on qualified emergency savings accounts and/or student loan payments. Also, under the new law, updates rules could delay required distributions for those choosing to work past the age of 72.
Retirement transition assistance
For those reaching retirement age, offering education about retirement plan distribution options and backup plans if entering retirement sooner than expected can help ease the transition period and concerns over having enough savings. Additionally, creating flexible schedule opportunities to phase into retirement is helpful as they decide whether to make the change.
Overall, one of the best things to offer clients is ongoing benefit communication and resources, especially as retirement plans and laws change. Making this information and support readily available will increase awareness of employer offerings to bolster benefit utilization and promote future financial well-being.
Retirement planning calls for customization
A diverse workforce calls for equally diverse benefit options. With multiple generations in the workforce, brokers and their clients want a PEO partner equipped to personalize benefit options.
Unlike big-box PEOs, which offer catch-all solutions and automated responses, ExtensisHR takes a tailored approach to help build long-term success. We work closely with brokers and their clients to create flexible HR and benefit plans which meet the current needs and wants of employees.
To learn more about how our extensive suite of HR services can benefit your clients and strengthen your portfolio, contact ExtensisHR today.