Choose your own adventure

Research from Morgan Stanley at Work also found that 401(k) retirement accounts are the first investment made for more than half the workforce. Workers also mentally compartmentalize their retirement investments as separate from the rest of their finances. This makes it even more important that the retirement programs you offer are serving their true purpose: Helping preparing each individual employee for their future retirement. 

But not every employee has the same future needs. For the first time, we have five generations working side by side. We're also grappling with important issues of systemic justice around diversity, equity, and inclusion—both as a society and as a business community. 

And amid an ongoing global pandemic and people leaving current jobs for new opportunities like never before, it makes sense that many participants may request a different approach both in planning for and spending their retirement benefits. Simply put, one size can't fit all: Even at the broadest level, not every person will retire at the same age or into the same living situation, with the same level of health and mobility, or with the same nest egg and the same spending needs. 

Making it personal

User-friendly, customized experiences are the new differentiator in a world where employees need (and expect) support that fits their unique financial journey. It's important for employers to understand how this trend affects employee perceptions around their retirement plan choices.

For example, some generations have watched their parents or grandparents in retirement and decided that they want to do things differently. Some may opt to spend more of their dedicated retirement account savings during the early years of retirement—perhaps travelling or buying a dream house when they expect to be in their best health—even if it means the tradeoff of reducing spending in later years.

Traditional, linear retirement spending plans can't quite facilitate this kind of retirement choice. To get there, providers need to be able to make dynamic, personalized adjustments along the way—whether it's adding discretionary spending for travel on top of the first 15 years' base expenses, evolving with changing lifestyles, or aligning anticipated spending with unexpected market conditions. 

The brass tacks

Post-covid, as priorities shift for many of us and decisions around quality of life take on new urgency, retirement planning is getting more personal. 

Offering a retirement solution that can adapt to fit the full range of diverse workers' needs can be complex, but there are a few key principles that can help you make your retirement benefits work harder for your employees.

1. Go granular – Many employees want help tailoring their retirement savings to help them budget for changing needs up to and throughout their golden years, but the first step is helping them connect the dots between their personal goals, where they are today, and how they can extract the most value from their workplace benefits. That way, they can begin to chart their own path towards building disposable income, evaluating progress, and understanding how investing in their future benefits them and their families over time.
2. Take a wider view – While employees manage their regular budgeting, credit, cost of living, and debt obligations, employers can help them understand the context of how these seemingly disparate parts of their financial world fit together. For example, which of their current expenses are fixed? Which drop off eventually, like a mortgage? Which are essential or discretionary? The more employees understand, the more they will be able to engage and customize.
3. Leverage professional guidance – A knowledgeable professional can help employees navigate the many unknowns of retirement and answer more personal questions—whether it's around financial decision-making, effective planning, or making the most of workplace benefits. Greater knowledge also means a greater chance that your employees will feel more confident about participating in your retirement plan and applying workplace benefits to their unique situation.
4. Schedule regular check-ups. Personalized planning does come with some tradeoffs—like the need for more active financial advisor involvement and personal management of retirement accounts both now and down the road. Set markers to remind employees about regular updates and check-in just to make sure that their retirement plan is still tracking with their goals, especially for more complex spending and withdrawal strategies. 

Personal freedom on strong financial foundations

Retirement can be technical, but it's also aspirational—so it's no wonder we're seeing a trend of employees and retirees requesting a more flexible approach that can adjust based on what's happening in their lives.

That's why it's important to connect with your employees today and help them understand the importance of maximizing their choices and their benefits—whether that means a more personalized retirement plan structure or simply a slow and steady journey of disciplined saving and spending. Make sure employees understand the true scope of their needs as well as their wants and are supported in making choices that make sense for their personal goals.

Anthony Bunnell is Managing Director, Head of Retirement at Morgan Stanley at Work.

Disclosures: This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. 2021 Morgan Stanley Smith Barney LLC.   Member SIPC.    CRC 3928253     11/21