Employees working longer, contributing less | Calgary Debt ...

American workers may have to work beyond age 65 just to make ends meet, and few are meeting their recommended pension contribution rates.

That?s the report from the Employee Benefit Research Institute?s latest policy forum, held this past spring in Washington, DC.

Working into retirement
If baby boomers and gen Xers delay their retirement past age 65, many of them still would not have adequate income to cover their basic retirement expenses and healthcare costs?especially low-income workers, reported Jack VanDerhei, research director for the Employee Benefit Research Institute. Even if workers delay their retirements into their 70s, there is still a chance the household will be at risk of running short of money.

As boomers continue to work beyond retirement age, employers will have to deal with generational differences in their workforce. As such, they will need to address ways of managing aging employees, and may need to customize job designs to accommodate older workers.

Failure to save
Many automatically enrolled 401(k) participants appear to be staying at the typical 3% default contribution rate, Lori Lucas, executive vice-president at Callan Associates, noted in her presentation on plan design. Employers typically recommend they contribute at least 10% in order to achieve retirement adequacy.

Lucas said the major threat to retirement income adequacy is from cash-outs, where workers leaving a job take out all their retirement savings in cash rather than rolling over the assets into another tax-favoured account.

Other speakers suggested plan sponsors should provide employees with more help in investing, and that workers could improve their financial security with better asset management?in particular, cutting debt and using guaranteed income products such as life annuities to manage longevity risk.

Benefits Canada ? News

Source: http://finance101now.com/2011/09/employees-working-longer-contributing-less/

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