Skip to main content

You are here

Advertisement

A Look at How the Retirement Model Is Changing

Practice Management
The answers as to when retirement begins, and even what it means, are not the same as those even from not so long ago. A recent study offers a discussion of trends occurring to and affecting retirement.
 
In “From Traditional to Transitional: How the Nation’s Retirement Model Is Changing” (registration required) MetLife looks at how retirement is changing. “The traditional model of retirement — which assumed a fixed career end date and employer-paid benefits — is being replaced by a more transitional model,” said MetLife Executive Vice President and Head of Retirement & Income Solutions Graham Cox in a press release. “Today, retirement has evolved to be more fluid with an ebb and flow between work and retirement,” he added.
 
When Does Retirement Begin?
 
Not only has opinion on when retirement begins changed, MetLife found, there is rough agreement between employers and employees not only on that premise but also on more exact details.
 
The average expectation of employers, says the study, is that employees will retire at age 66. That compares favorably with the expectation of 43% of employees who anticipate retiring at age 65 or older. And there’s no end in sight, say both: 57% of employers expect that within the next five years employees will retire at a more advanced age than now, and 9% of employees expect to never retire at all.
 
Why the change? Employees commonly said that they:
 
  • want to continue to build their retirement savings;
  • want to maximize pension benefits; and
  • can’t afford to retire and need to have income to cover expenses and bills.
Says MetLife, “Historically, the question of when to retire was the most important career decision for an older worker. Today, however, the bigger question is not when they will retire but if they can.”
 
Employers were a bit schizophrenic in their sentiments regarding this trend. More than 40% indicated that they found the increasing age of the start of retirement to be a good thing in their wish that older workers would delay retirement so as to allow more time for them to transfer their knowledge to their younger counterparts.
 
MetLife Vice President and Head of Institutional Income Annuities Roberta Rafaloff, however, indicated that employers also have reservations about this change, remarking, “Compared to 10 years ago when employers were concerned with ‘brain drain,’ today’s employers are increasingly worried about the impact of delayed retirement.” And more than half of employers MetLife studied—55%—offered some insight into at least one of the reasons for that worry, expressing the wish that older workers would retire so as to make room for younger workers to advance.
 
And What Is Retirement, Anyway?
 
The traditional conception of retirement is that it is a sharp defining moment. Or rather, was. That notion is falling by the wayside, just as the view of when retirement begins is. Societal trends such as the rise of the gig economy and returning to work after retiring, for instance, make the definition a bit more fluid.
 
MetLife says that a majority of employers in its study—54%—think that the definition of “retirement” should be expanded. More than 40% of employees agree, they add, and even 29% of retirees concur.
 
Action Steps
 
“With this new retirement model come several considerations to meet the needs of an aging workforce, as well as the generations of workers who follow behind them,” says MetLife.
 
MetLife found strong agreement between employers and employed that it is important for retirees to have a source of guaranteed income that will last the rest of their lives. Nearly 90% of employers held that view, and 95% of employees did.
 
But, MetLife found, employers having that sentiment doesn’t necessarily translate to offering a means to make that happen. They report that 17% of the employers studied that offer a defined contribution plan include an option that allows plan participants to convert some or all of their savings into guaranteed income.
 
Rafaloff expressed hope that that may change, saying, “The passing of the SECURE Act may give more employers the confidence to offer guaranteed income options which, in turn, could help improve employee financial confidence and enable a smooth transition to retirement.”