1. Just out of Reish
Getting Older
The graying of the American work force
A
mericans are living longer. That has significant implica- The educational needs of older workers may be different than
tions for employees and plan sponsors. The U.S. Census of younger ones. Younger workers tend to use more technology
Bureau estimates that by 2050, more than 600,000 in their personal lives and, therefore, may adapt more quickly to
Americans will be age 100 or older. That is up from approxi- changing technology in the work place.
mately 2,300 in 1950. According to a study by the Society of Even with deferred retirement dates, employees will need
Actuaries, there is a 31% chance that, for a 65-year-old couple, at additional retirement information, such as how much income
least one spouse will live past age 95. In other words, it would be they will need in retirement. Furthermore, how much of the
reasonable for employees (and particularly married couples) who shortfall in that income will be offset by Social Security and
retire at age 65 to plan for at least 30 years of retirement living. other savings? How can a 401(k) account balance be used to
However, it may be unreasonable to retire at 65—at least for provide income for life? How
most employees—because it is very expensive to fund a 30-year
prepaid retirement. It may be possible for natural-born savers, I believe do you make the income last
for the remainder of a life-
but for most people, the required savings rate would cut back
significantly on their standard of living while they work. What
it means time, regardless of whether
it is 20 years or 40 years?
does all this mean? I believe it means that 70 or 72 is the new 65.
If I am correct, that presents a number of issues for
that 70 or Should those retirement
income products be offered
employers. For example, if an employer wants to encourage
employees to retire early, which could now mean at 65 or 67, it
72 is the in a 401(k) plan as the bene-
fits are accumulated? Should
may need to participate more actively in the retirement process.
That includes, for instance, making larger 401(k) contributions;
new 65. they be offered at retirement?
Or should they not be offered
automatically enrolling and increasing deferral rates; providing at all—leaving employees to
retirement planning services to employees age 50 and older; and “purchase” their retirement income at retail, which is ordinarily
offering income projections and information about retirement much more expensive than insurance and investments that can
needs to all employees. In other words, if an employer wants to be offered through a plan?
Unlike many of my columns, this one is about questions,
promote retirement at or around age 65, it needs to accept more
rather than answers. However, these are important questions
responsibility to ensure favorable retirement outcomes for its
that employers should be thinking about and be working to
employees.
answer. It is always good to know where we have been—but it is
But what if an employer is comfortable with the idea of an
even more important to know where we are going.
aging work force? Even then, changes are needed. For one thing,
employers may want to educate their employees about the inte-
gration of the company’s health benefits with Medicare … which Fred Reish is chair of the Financial Services ERISA practice
election should an employee make at age 65? Part A? Part B? Part at the law firm of Drinker, Biddle & Reath. A nationally rec-
D? Those are complex issues—and better decisions will be made ognized expert in employee benefits law, he has written four
if employers provide consulting and educational services. books and many articles about ERISA, IRS and DOL audits,
What about Social Security retirement income? Should and pension plan disputes. Fred has been awarded the
employees elect or defer? What educational assistance does the Institutional Investor Lifetime Achievement Award and the
employer provide in making that decision? What about work- PLANSPONSOR Lifetime Achievement Award. He is one of
place training and education to keep up with the rapid pace the 15 individuals named by PLANSPONSOR magazine as
of change? Regulations that govern our everyday activities are “Legends of the Retirement Industry,” and also one of five indi-
constantly changing. Technology seems to upgrade and evolve viduals acknowledged as Retirement Plan Adviser Legends
on an almost constant basis. There is always new equipment. by PLANADVISER magazine.
80 PLANSPONSOR.com May 2012