Protected by ERISA, which is now fifty years old, company sponsored retirement plans came of age when employees aimed to work up the ladder within a business, and retire securely, after a good climb. A pogo stick is now a more apt metaphor for the experience of workers, and that means there are new retirement risks to address.
Working Longer In A Faster World
At MIT’s AgeLab, longevity thought leader, Dr. Joe Coughlin, points out that the retirement risks ERISA was initially designed to address are shifting right in front of us, creating new challenges for employers and workers alike as we all grapple with the probability of living and working longer in a faster world:
When ERISA was enacted five decades ago, the world seemed more straightforward—its mission was clear: safeguarding employee pensions and providing a foundation for retirement security….The days of a single career for a lifetime are fading fast and challenging the assumption that decades of employment with a single or even a few employers will provide health and financial security in older age….Thanks, in part, to technological advancements, healthcare, and nutrition improvements, people live longer than ever. This demographic reality of what might be distilled down to simply having more time challenges not only traditional notions of retirement but also how we approach work and career and the types of risks that are the assumptions underpinning ERISA….….
Of course the likelihood of having a longer older age to finance directly impacts today’s aging employees, many of whom need or want to continue working despite the challenge of remaining relevant in a faster moving world. Emerging trends among younger workers are also noteworthy as we navigate the changes the longevity economy brings:
Around 45% of 18 to 29-year-olds currently live at home, the highest percentage since the 1940s. Half of people under 34 report not having a steady partner, spouse, or even a friend with benefits. On a related note, there has also been a significant decline in the birth rate. Each of these trends now occurs during a stage of life once associated with young adulthood, career building, and wealth accumulation.
Living solo without a partner, a mortgage, or children is likely to give a person more flexibility, a higher risk tolerance, and the willingness to jump to better employment situations than an employee who is shouldering the financial, housing, education, and health responsibilities of others. The career ladder is being replaced with a more apt metaphor of a career pogo stick, where younger employees hop from opportunity to opportunity. A survey of 1,100 Gen Zers indicates that 83% of workers characterize themselves as job hoppers….
It’s no wonder that the stigma previously associated with job-hopping has gone by the wayside. Indeed, job hopping can even lead to some benefits—but those don’t come without risks, including those associated with secure retirement:
While job hopping might lead to increased income, better work-life balance, and opportunities to develop new skills, it is not without risks. Each hop potentially interrupts participation in retirement programs, contributions, and employer matching. Frequent moves between employers may also result in the temporary loss of other benefits, requiring a person to use savings to pay for health or other insurance that might have been used for retirement or buying a home….. Delayed life stages, frequent career moves, interrupted wealth accumulation, and retirement savings in young adulthood may expose workers to greater financial risk in older age – a life stage that may be significantly longer for them than for the population ERISA envisioned five decades ago.
Sponsoring A Retirement Plan Makes A Difference
With the path to secure retirement becoming more challenging given the dual dynamic of longer lives and higher costs of living, it’s not surprising that saving for older age is top of mind for so many workers of all ages: a U.S. Retirement Readiness Survey from Schroders found that toward retiring comfortably,“Americans think they will need to save $1.2 million; however, 46% expect to have less than $500,000 at retirement, and half of them anticipate having less than half that amount.” Though there are so many new questions to address in the face of the longevity economy, it remains true for businesses that sponsoring a retirement plan certainly helps: “retirement confidence is “more than twice as high among those with retirement plan coverage than among those who lack it.”
As plan sponsors across the country row into new plan options and designs, it’s a wise move to also put solid protections in place. Trusted national ERISA Fidelity Bond provider, Colonial Surety Company, is pleased to make it efficient and affordable for plan sponsors to substantially reduce their own liabilities via fiduciary and cyber liability coverage. For less than a few dollars a day, you’ll immediately have documented proof of cybersecurity coverage for the business and plan, and defense costs and penalty limits up to $1,000,000 for yourself, if faced with alleged or actual breaches of duty in connection with the employee retirement plan.
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