Employers’ (lack Of) Response to the Retirement Income Challenge

Employers have long had a significant impact on by wanting to stay on the job at least two years past workers’ retirement prospects. Aside from Social that traditional retirement age; but 3) the employers Security, employer retirement income plans are the are lukewarm about creating opportunities for even most important source of income for the great majorhalf of these employees to work longer. Note that the ity of retirees. How long workers can stay employed survey was conducted well before the financial crisis; also largely depends on employer hiring and retenthe retirement preparedness of workers has deteriotion and retirement decisions. Both of these funcrated since the survey – making potential employer tions – retirement income support and the separation responses all the more important. process – are now in flux given scheduled declines in The survey also asked employers about other reSocial Security replacement rates, the shift from traditirement-related initiatives they might adopt over the tional defined benefit pensions to 401(k)-type defined next five to ten years. The survey inquired whether contribution plans, and the decline in career employthey might: 1) create employment opportunities for ment relationships. workers to stay on the job longer; 2) significantly To assess the employers’ response to changes in increase their encouragement of retirement saving; 3) retirement income support and the work-separation communicate with individual employees “to develop process, the Center for Retirement Research at a plan that makes their retirement a more orderly Boston College conducted a nationally representative and predictable process;” and 4) tighten performance survey of 400 employers. The survey was conducted reviews “to improve decisions on whether to retain or in 2006 and focused on the employers’ response to dismiss” employees. the prospects of employees in their 50s. As reported This brief presents an analysis of these responses in previous Issue in Briefs, the survey found that and what they say about the role of employers in the employers expect: 1) half these employees will lack the nation’s retirement income system. The analysis resources needed to retire at the organization’s tradifinds that employer interest in these retirementtional retirement age; 2) one out of four will respond related initiatives is not a response to the retirement