Retirement in the new normal: Helping employees align expectations with reality

As the COVID-19 pandemic continues to loom large over all aspects of our society, it’s no surprise that plan sponsors are witnessing substantive changes in their employees’ plans for retirement. In fact, according to new MetLife research, as many as 19% of respondents stated that they are considering retirement delays, and 12% are considering retirement accelerations as a direct result of the pandemic.

Of course, after a year defined by heightened economic and social uncertainties, it’s certainly understandable that many employees are beginning to view the future in a new light. However, as plan sponsors work to account for these changes, MetLife’s data shows that they’re not nearly as dialed-in on employee sentiments as they might think.

Today, a disconnect is rapidly emerging between expectation and reality with regard to why participants are actually changing their retirement plans. In order for plan sponsors to advise on these important decisions, it’s critically important that they better understand employee pain points so they can help prepare them for the future.

Here are three considerations that plan sponsors should keep in mind.

1. Plan participants’ financial security has been impacted more than plan sponsors realize.

As many can attest, financial instability has been one impact of the COVID-19 pandemic – with rising unemployment and rampant market uncertainty impacting millions of Americans nationwide.

With this in mind, it’s to be expected that of the 19% of plan participants delaying retirement, 31% stated that they have delayed their retirement because they needed a continued source of monthly income.

Unfortunately, however, despite these clear trends, only 16% of plan sponsors cited this rationale as a reason for retirement delay.

What does this data tell us? Plan participants’ financial security has been impacted far more than we realize – and employers need to take notice.

By ensuring regular communication about existing offerings, remaining transparent and, perhaps most importantly, asking tough questions, plan sponsors can get a better understanding of their participants’ financial circumstances – and can amend their benefits offerings in order to meet their needs.

2. Plan participants aren’t just delaying their retirement – some are retiring sooner.

Interestingly enough, while the pandemic has catalyzed lasting concerns over long-term financial stability, it has also served as a wake-up call.

Thirty-one percent of those plan participants planning to accelerate their retirement plans, cite “life is too short,” as the reason.

However, this is a reality that has somewhat evaded plan sponsors, 32% of whom stated that employees are accelerating their retirement because they’ve able to save during this period in quarantine.

Particularly as we begin envisioning life in the new normal, it’s clear that plan participants are overwhelmingly prioritizing work-life balance and, consequently, early retirement as a means of escaping the isolation they experienced in 2020.

If this past year has shown us anything, it’s the value of togetherness and the importance of spending time with those you love.

Accordingly, when the pandemic inevitably ends, and we begin on the road to recovery, plan sponsors should expect accelerated retirement plans to become a regularly accepted part of modern business practice.

The sooner they do, the sooner they’ll be able to build benefits offerings that will help participants successfully prepare for retirement and enjoy security once they retire.

3. There’s room to educate plan participants – and even plan sponsors – on DC plan offerings.

Plan sponsors can build the perfect retirement plan for their employees; however, if their employees don’t understand what they’re getting, it’s difficult – if not impossible – for them to make informed decisions.

In addition to helping participants be better informed, there is an opportunity for plan sponsors to learn more about retirement income solutions for their plans.

One-quarter (27%) of plan sponsors are unaware that their company is able to offer fixed income annuities to DC plan participants. And one in 10 outright admit they don’t understand them.

As we look to the future, plan sponsors must begin taking active steps to ensure they’re not only offering benefits that account for shifting employee sentiments, but they’re also educating participants about what’s made available to them.

Particularly as financial uncertainty and “pandemic fatigue” abound, it’s time to bridge critical gaps in our understanding of retirement in the new normal. In doing so, plan sponsors can create more tailored and effective benefits packages and help participants step confidently into the future knowing that their employer is there to support them.

Roberta Rafaloff is Vice President of Institutional Income Annuities at MetLife.