Health care workers: 1 out of 3 not saving enough for retirement
Retirement planning advice is the first step toward improving retirement readiness, namely, how to invest, how much to save, when to retire and the role an annuity can play as part of a retirement plan, according to a TIAA report.
While nine in 10 health care workers are saving for retirement, one out of three doctors, surgeons, nurses and other hospital and health care workers are not confident they are saving enough money to retire comfortably, according to a new report from TIAA Institute, Retirement Readiness in the Healthcare Sector.
“While employees in the health care industry face challenges that may differ from other workforce sectors – their priorities for retirement are the same,” said Surya Kolluri, Head of TIAA Institute.
Retirement confidence is lowest among nurses – 42% are not confident they are saving enough for retirement. According to the report, while 91% of hospital and health care system employees are saving through employer-based plans:
- 34% aren’t confident they are saving an adequate amount.
- 24% aren’t confident their savings are invested appropriately.
- 28% do not believe they will have enough money to live comfortably throughout retirement.
Challenges affecting retirement readiness
There are three challenges affecting retirement readiness for health care employees, said Kolluri:
- Debt, including debt from student loans.
- Retirement plan leakage due to debt (hardship withdrawals).
- A lack of retirement planning advice.
Mounting debt is a problem for retirement savings:
- 85% reported carrying debt.
- 45% are saving less because of debt.
Student debt is an even bigger problem. Among the 23% of savers who carry student loan debt:
- 70% save less because of debt payments
- 45% have taken a loan or hardship withdrawal
- 9% are very confident they’re savings enough
“Student loan debt affects retirement confidence because paying off loans gets in the way of saving. And those with debt are more likely to tap into their savings before retiring, creating a vicious circle,” said Kolluri. “What we’re also finding is that getting advice is key to improving how confident people feel about being able to live the life they in retirement. And when people actually follow the advice they get, their confidence goes up exponentially.”
“Retirement planning advice is the first step toward improving retirement readiness and income security,” said Jim Mullery, Head of Institutional Relationship Management. “Advice topics can include how to invest, how much to save, when to retire and the role an annuity can play as part of a retirement plan for that regular income stream that lasts as long as you live.”
According to the report, 58% of health care employees say they are likely to use an annuity. Paradoxically, among those unlikely to annuitize, 67% rated “not outliving financial assets” as a high financial priority for retirement, exactly what annuitization insures against.
“Reluctance to annuitize signals a retirement planning disconnect that’s easily overcome with some advice and education,” said Mullery. “In-plan annuities can be a real confidence booster for retirement savers. They are a great option for creating a source of guaranteed income to protect against retirement risks such as longevity risk, cognitive risk, and market volatility.”
Related: Health care costs: What most retired (and near-retirement) workers worry about
Health care employers can play a pivotal role in helping improve employee retirement readiness, said Kollari. “Offering programs such as financial education or planning assistance as part of the employee benefit package could help employees in need of debt reduction strategies or with basic financial assistance such as creating a budget …
“Within the last two years, 51% of retirement savers in the health care sector reported receiving professional retirement planning advice and 26% are ‘very confidant’ they will have enough money to live comfortably in retirement,” said Kolluri. “This figure increases to 47% for those following the advice received. Retirement savers who received advice on how to draw income from savings during retirement are more likely to annuitize. 61% of retirement savers who’ve received advice on how to draw income from savings during retirement are likely to annuitize some of their savings, with 16% definitely expecting to do so.”