Plan sponsors may want to consider using the key associations of freedom and enjoyment retirees use to help draw workers towards retirement planning. This may reduce anxiety about having sufficient funds when the time comes to retire. At the same time, sponsors may want to help those soon to retire think about planning new schedules to reduce anxiety around the transition from work to what comes after.
Motivating employees to save for retirement has been a struggle for many plan sponsors. While some statistics show that new tricks and tips, like increasing auto-enrollment, have impacted participation in retirement plans, enrollment may still lag. It is possible that the way employees think about retirement in general could be behind the lag in active retirement investing.
In a report published in the Fall of 2024, TransAmerica Institute found that many retirees have positive associations with the word retirement. “Retirees view retirement enthusiastically. More than four in five retirees (86%) cite positive word associations with the word ‘retirement,’ while 37% cite negative word associations. Their top two positive word associations are ‘freedom’ (68%) and ‘enjoyment’ (58%)….”[1] The positive association with retirement that retirees have echoes studies of all workers dating before the pandemic. For example, four years earlier, the TransAmerica Institute found that 86% of “workers cite positive word associations with ‘retirement, compared with only 37 percent who cite negative words.”[2]
Yet, the positive association with the word retirement among all populations has dropped almost 10% since 2019. And, importantly, associations with retirement may reflect more of the age cohort involved.[3]“However, optimism varies by life stage: 60% of retirees feel happiness, and 51% are leaning into gratitude…. On the other hand, those who have not retired express happiness (40%) and gratitude (33%) less frequently than those already in their golden years. Instead, working adults feel more anxious … and fearful…. Meanwhile, …69% cite negative sentiments like anxiety….”[4].
Happy talk about retirement may reflect more about the ability to retire and less about actual retirement. According to Gallup, about 75% of those who have retired report that “they have enough money to live comfortably,” compared to “the more negative expectations among those who have yet to retire. Just about half of nonretirees, 45% this year, say they will have enough money to live comfortably when they retire….”[5] A new report from AARP indicates that as much as 20% of workers ages fifty and over “have no retirement savings, and more than half (61%) are worried they will not have enough money to support them in retirement.”[6]
Financial capacity might not be the only thing stressing employes out about retirement. It may be the process of leaving work itself that causes concern. When a key employee retires, they say goodbye to more than just their coworkers, they also say sayonara to alarm clocks, bosses, and commutes. “Eighty-four percent (84%) said they strongly agreed or somewhat agreed that learning how others have managed their transition from work to what is next is helpful.”[7]
Employees nearing retirement may also want to learn how to balance their new schedules. Retirees may struggle to accept that having volunteer work, or a retirement passion like golf, music, or gardening, does not have to fill up the same eight-hour day that their jobs did. They may benefit from having a retirement schedule, a set plan of activities that helps them transition from work into a slower pace. At its heart, the concern over retirement may go to one of identity.
Plan sponsors may want to consider using the key associations of freedom and enjoyment retirees use to help draw workers towards retirement planning. This may reduce anxiety about having sufficient funds when the time comes to retire. At the same time, sponsors may want to help those soon to retire think about planning new schedules to reduce anxiety around the transition from work to what comes after.
[5] https://news.gallup.com/poll/648773/why-americans-pleasantly-surprised-retirement.aspx
[6] https://press.aarp.org/2024-4-24-New-AARP-Survey-1-in-5-Americans-Ages-50-Have-No-Retirement-Savings
[7] https://heyboomer.biz/2023/04/20/how-do-you-feel-about-retirement
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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