PLANSPONSOR - November - December 2023 - 33

Goldman Sachs in Albany, New York. Plan
sponsors are responding, she says.
" The conversation we have with many
companies now is about how participants
can manage [their] money throughout
retirement, " Barber says.
T. Rowe Price too is studying how
unexpected costs can affect retirement. A
recent analysis found that, while spending
typically drops in those years, it can be
" choppy " for many, says the firm's report
" Planning for Spending Volatility in
Retirement. " One in four retirees experienced
an up to 20% increase in annual
spending over a two-year period, mainly
related to housing.
Rachel Weker, vice president and
senior retirement strategist in retirement
plan services at the firm, in Owings Mills,
Maryland, says housing gets overlooked as
a source of varying retirement expenses
because so much discussion centers on
medical bills and the possibility of needing
assisted living. She sees an opportunity for
plan sponsors and their providers to build
awareness among participants long before
a capsizing emergency occurs, and when
people are still pre-retirees.
" We see significant engagement from
participants as they approach that retirement
date, " Weker says. " That's the good
news. So this type of research is really
helpful to awaken ourselves to the idea:
'Oh, right, I need to think about that.' "
Weker advises helping participants get
granular with their retirement spending
plans and encouraging them to earmark
some of what they save to funds that are
easily tapped. Retirement planning tools,
such as those showing how making particular
choices-e.g., moving to a bigger
house, vs. downsizing-might affect their
costs in retirement, can also aid planning.
" The plan sponsor and employer have
a good opportunity to provide access to
information like this, " Weker says.
The shifting economy especially,
with the rising costs due to inflation, is
spotlighting the importance of preparing
employees for the unknown, says
Jennifer DeMeo, managing director with
WTW in New York City.
" Employees constantly have to decide
between different areas of savings and
need for financial protection, " she says.
" We do see [more] employers thinking
about, 'How do you support employees
during their working lifetime as well as
into retirement?' "
DeMeo says any tools, programs or
resources should build employees' financial
well-being and resilience-both before
and into retirement. Programs could
include one-on-one financial coaching or
access to financial education and webinars,
and she recommends that companies individualize
their messaging.
Companies should analyze whether
their programs effectively support their
various cohorts, she says. For instance, a
company may want to consider: Do lowerpaid
employees benefit enough from our
programs to sufficiently save to retire?
And how do you support resilience and
provide resources for the unexpected-
including before retirement? Some companies
are seeking to address specific financial
anxieties by offering voluntary benefits,
one being long-term care insurance.
DeMeo notes the value of surveying
employees to gauge their priorities and
better understand their particular financial
struggles.
" Employers have limited
bandwidth, so they'll want to focus on
areas where employees need the most
help. " And they should also make known
what they have. " Sometimes we'll hear that
employees are looking for something that's
already offered, " she says.
Sarah Cathey, vice president and financial
adviser with CAPTRUST in Kansas
City, Missouri, who works with plan participants,
says financial wellness and advice
programs enable targeting the education to
match the employee's life stage and needs.
In her experience, individuals have highly
specific circumstances-e.g., one physician's-group
client had numerous income
tax questions, while a group of architects
were managing multiple student loans.
" One-on-one advice is by far the
most significant driver of retirement
readiness, mainly because participants
need a compassionate ear-they want
someone to listen to them and understand
their needs, " Cathey says. " Plan participants
more than ever are looking to their
employer or to their plan sponsor for help
and guidance with retirement readiness. "
Cathey says the SECURE [Setting
Every Community Up for Retirement
Enhancement] 2.0 Act of 2022 has
launched a new discussion at work
concerning the need for emergency
funds, given the provisions allowing
employers
to link emergency
savings
accounts to a defined contribution plan
in an amount up to $2,500 each.
But Barber encourages employers to
expand beyond this to consider what ideal
emergency savings would look like. " We
should focus on it and look for opportunities
to assist, but it isn't enough, " she says.
" For very few people, $2,500 would be
enough emergency savings. "
Instead, she suggests sponsors facilitate
participants building cash reserves of
three to six months of expenses; doing this
discourages employees from viewing their
401(k) account as short-term savings, she
says. She sees some companies tap into
their relationships at
local credit unions
and banks to establish payroll deductions
to a savings account, with the employer
sometimes creating an incentive or match.
Barber says to remind employees
of the triple tax advantage of saving in a
health savings account and how these can
be leveraged as long-term savings for retirement
medical expenses. And, for retirees,
managing unexpected bills may be easier
if the person has some type of lifetime
income option, which can be depended on
when managing money, Barber says.
For most people, planning for the
highly individual,
unknown will be
DeMeo says.
" Many employers look at the support
they provide through the lens of understanding
that
employees have
diverse
needs, " DeMeo says. " It's not a one-sizefits-all.
The unexpected will vary from
person to person. " -Elizabeth Harris
PLANSPONSOR.COM November - December 2023 33
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