PLANSPONSOR - February/March 2018 - 14

Upfront
Helping
Workers
Measure
Retirement
Readiness
MUCH has been written about
retirement-age
workers hanging onto employment
due to insufficient savings, costing
disproportionate amounts in benefits
and salaries and blocking young workers'
career path. But they can also retire earlier
than expected, " creat[ing] gaps in knowledge
and disruption to business units
or divisions and to talent transitions, "
says Jonathan Price, vice president and
consulting actuary at Sibson Consulting.
Either way, employers should know
how to help workers achieve retirement
readiness, including how to measure
their progress, so all will be prepared.
Retirement plan providers offer
many tools and/or calculators as means
by which to measure. Some utilize the
income replacement ratio, others, a wealth
accumulation factor-account balance
divided by pay-Price says.
However, the standard goal of
replacing 70% of gross income may not
be appropriate for all, says a Congressional
Budget Office (CBO) report. To better
capture people's unique circumstances,
researchers have developed a range of
target rates that vary with individual characteristics,
such as marital status, lifetime
income and homeownership.
According to Price, one can find
advantages and pitfalls in using each type
of factor. Sibson assigns a grade to each
participant's expected retirement readiness-possibly
based on income replacement-but
also factors in uncertainty:
What is the probability the employee will
reach the readiness goal? " Employers need
to know [there is variability], " Price says.
Some providers and industry representatives
are creating retirement readiness
measures that consider that variability
and are identifying changes participants
could make in their working lives and
saving habits.
Chris Lange, senior vice president,
digital solutions, retirement, at Voya
Financial, says presenting each participant
with a monthly income projection based
on his combined retirement plan balances,
intended future contributions and outside
assets has been successful to encourage
saving. " When participants see this, they
are inclined to take action, " she notes.
Voya created a tool whereby plan
sponsors can see, through data visualization,
each worker's saving progress.
" They then can send targeted messages
and work with employees who need
it, " she says. The tool has an adjustable
retirement income replacement rate and
shows participants the impact of each
financial decision, such as participating
in the plan or taking a loan, she says.
Tom Armstrong, vice president,
14 PLANSPONSOR.com February-March 2018 Art by Kyle Stecker
customer analytics and insights at Voya,
says plan sponsors benefit by understanding
how participants achieve retirement
readiness-what key variables influence
that process.
In terms of participant decisionmaking,
engagement and financial wellness
play important roles, Lange says.
Digging deeper, the Voya Behavioral
Finance Institute for Innovation did an
analysis of participants' decision styles
and found that more reflective participants
have better outcomes. The presence
of this quality can be determined by how
readily they make decisions from digital
engagement, Armstrong says.
For example, if a participant moves a
slider in the retirement readiness tool to
increase or decrease his savings rate, he
is using reflective thinking to see how
saving more would help. Many have used
this to move their retirement date earlier,
Armstrong says.
Lange says this all ties in to workforce
management: being prepared to
address the prospect of valued workers
retiring early or the discovery that many
are retiring too late. -Rebecca Moore
http://www.PLANSPONSOR.com
PLANSPONSOR - February/March 2018

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