A recent study conducted by Towers Perrin in the US reveals some dramatically changing expectations about retirement which are likely to reshape the retirement landscape for both employers and their employees.
According to the 2003 Towers Perrin Retirement Study, Redefining Retirement in the 21st Century, most Americans don’t expect — and many don’t even want — lives of leisure in their later years.
Nor, according to the study, do they expect company and government programs to yield lifetime financial security.
While most respondents appeared willing to play a larger role in funding and managing their retirement resources, few were adequately prepared for that responsibility.
Towers Perrin Australian principal Steve Shubert says that while the study reflects an entirely US focus, there are undoubted implications for Australia.
He says there are already parallels in terms of many Australians, concerned about their superannuation, choosing to spend longer in the workforce.
The Towers Perrin study involved more than 2000 full-time employees of mid-size and large US companies, and more than 350 human resource executives and managers at similarly-sized businesses.
The study focused on how demographics, economics and social factors are changing employees’ and emloyers’ views of retirement and retirement programs in general.
“Many of today’s working Americans no longer view retirement as a distinct stage of life, but instead as an extension of life’s experiences, which will continue to include work,” according to Towers Perrin principal and managing director of the firm’s HR Services business global retirement consulting practice, Steve Kerstein.
Kerstein says that given these findings, it is time for retirement programs to evolve to meet the needs of today’s businesses and employees.
The study found that while retirement in the US has traditionally involved a period of leisure following a 30 to 40 year career, 78 per cent of employee respondents indicated they expected to continue working in some capacity well into retirement years.
It says that 64 per cent of such respondents expect to work part-time, while 57 per cent plan to change occupations.
“Significantly, 35 per cent of those employees who expect to continue working into their retirement years say they will continue working for financial reasons, while 43 per cent say they will work chiefly to stay involved and active,” the study says.
Looking at the question of how survey respondents expect to fund their retirement years, the study says the majority do not expect company or government retirement programs to yield lifetime financial security.
The study says 60 per cent of respondents anticipate reductions in defined benefit coverage, while 36 per cent have only savings-type retirement plans in the future.
“In addition, 62 per cent expect their companies to continue to shift more of the cost of retiree medical coverage to them,” the study says.
The greatest concerns expressed by employee respondents related to the cost of medical care at a time of declining health, while more than a quarter said they were worried about outliving their retirement savings.
Employers, by comparison, expressed concern about being forced to balance the needs of their employees upon retirement with today’s economic realities.
The study says 76 per cent of employer respondents believe they have a continuing obligation to help finance employees’ retirement, but wrestle with tremendous cost pressures in today’s economic environment.
“From this research and other study we have conducted over the last year, we see significant evidence that employees are pragmatic and realistic about retirement issues,” the study says. “They recognise that benefit programs are under increasing pressure as employers struggle to control costs that continue to intensify in today’s competitive global economy.”
“This is especially true among younger employees just entering the workforce who appear to accept more of the responsibility for providing for retirement,” it says.
