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A new study from the Aegon Center for Longevity and Retirement mirrors the findings of the recent Questis white paper on the rapidly changing landscape of retirement. The Aegon study on retirement readiness has been conducted annually for the past seven years, and has surveyed more than 100,000 people in 15 different countries, including the United States. Combined, the two papers offer both cause for concern and reasons for hope.

The results of the Aegon survey showed respondents are beginning to recognize that an aging population and increased longevity are two trends that will affect their ability to retire. There is a growing awareness among some, but not all, respondents that they can no longer rely on defined benefit plans as a source of retirement income, and that they as individuals will need to take increased responsibility for retirement planning. And as technology is changing the way that people work, flexible labor markets and multiple jobs over the course of a career are now the norm.

Both the Aegon survey and the Questis white paper highlight that retirement has become an active stage of life. People want to remain socially connected, be active participants in their communities, and stay economically active. Fifty-seven percent of workers worldwide see themselves working as they currently are, or working part-time in transition to or during their retirement. Most are planning to do so because they both want to and/or need to work. Continuing to earn an income later in life provides an opportunity to continue saving and delay drawing down retirement benefits and savings. But working in retirement is often more difficult than anticipated due to health issues or jobs being eliminated.

Many employees realize that they are facing a financially insecure retirement. Globally, workers expect they will need about 70% of their current annual income in retirement. But only 25% believe they will achieve this level. A mere 13% believe they will achieve 75% of their required income. And only a third of employees (32%) have a backup plan if they are unable to continue working before their planned retirement age. This is problematic because we know that although 89% of workers say they plan to work at least part-time in retirement, only 26% actually do so, according to the Employee Benefits Research Institute. Employees typically retire sooner than they had anticipated because of their own or another family member’s health issues or because of layoffs.

Further indications of future financial insecurity are evidenced by another survey question. When asked what they are doing to prepare for retirement, respondents most frequently cited social security or other government-sponsored plan (46%), followed by savings accounts/money market funds/certificates of deposit (38%), a private pension/individual retirement account (IRA) (29%), life insurance (24%), and investments such as stocks, bonds, and mutual funds, (23%). Only 19% cited a company-funded defined benefit plan and, even fewer (16%), cite an employee-funded defined contribution plan.

With defined contribution plans having largely replaced defined benefit plans, the responsibilities and risks of retirement planning have shifted from employers to employees. With low levels of financial literacy, many employees are unprepared to make the necessary decisions to ensure adequate retirement savings, even those fortunate enough to have access to DC plans. Currently, less than two-thirds of workers have access to employer-sponsored DC plans. Only 57% of US workers say their employer offers a retirement plan that includes an employer contribution. Overall, 35% of private sector workers aren’t employed by a company that offers a plan.

These figures are even worse for younger generations. According to the Pew Research Center, 41% of millennials don’t have access to an employer-sponsored retirement plan, along with 35% of Gen-X and 30% of boomers.

The new retirement reality is that more employees will need to continue working past the traditional retirement age. Despite the popular myth that every employee who fails to retire on time costs an employer $50,000, there is little evidence to support that number. Using real-world benefits data, Aon Hewitt and AARP have found that older, experienced employees don’t cost more than younger workers whose health care costs are increasing more rapidly. Retaining older workers can improve a company’s profits–older workers have been demonstrated to be more engaged, are just as technologically savvy, have better-developed soft skills, and can mentor and be mentored by younger employees.

Working longer offers other advantages in addition to the obvious economic ones—a job can provide a sense of social connection and cognitive stimulation, both of which appear to offer protective health benefits and can potentially reduce healthcare costs. It will become increasingly important for workers to reframe their career education and training in terms of lifelong learning to increase and improve skills. Employers can help by offering flexible retirement options, such as retaining valuable employees with reduced hours, to create a more gradual transition into retirement. Retirement plan advisors can help by including authentic financial wellness as an integrated component of their plan offering. The bottom line? When people can stay economically active longer and ease into retirement on their own terms, their retirement savings can last longer and have more time to grow.

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