Retirement readiness – a crucial aspect of financial planning – is a growing concern for many employees, especially those in public sector jobs, according to new research from the MissionSquare Research Institute. The importance of feeling financially secure for retirement cannot be overstated, as it directly impact an employee’s peace of mind, according to the research.
According to the MissionSquare research, while a majority (81%) of full-time state and local government workers are worried about having sufficient funds to last throughout their retirement, employees with 20+ years of service expressed less concern about factors such as emergency savings, the ability to retire on time, and the overall costs of living in retirement compared to their less-tenured peers.
“Several factors may influence retirement readiness for workers, including one’s income and access to financial education and employer-sponsored retirement plans,” said Zhikun Liu, Ph.D., CFP®, vice president, head of the MissionSquare Research Institute. “While all employees can benefit from robust retirement planning resources, our research highlights the importance of providing targeted support to those less-tenured workers who may often face greater financial uncertainty as they plan for retirement.”
The Institute’s report, “What Helps Public Sector Workers Feel Ready for Retirement? An In-Depth Study by Job Tenure, and Other Factors,” outlines notable differences in retirement-related concerns across tenure groups, indicating opportunities for employers to offer practical and targeted strategies to enhance retirement readiness:
Emergency savings: More than three-quarters (77%) of employees with less than 10 years of service are worried about their emergency savings, compared to those with 10 to 19 years (71%) and those with 20 or more years of service (64%).
Retirement readiness: More than 81% of employees with less than 19 years of service have concerns about having enough money to last throughout retirement, compared to 76% of those with 20 or more years of service.
Delaying retirement: 77% of employees with less than 10 years of service and 74% with 10 to 19 years of service have concerns about retiring on time, compared to only 63% of those with 20 or more years of service.
Better retirement benefits, such as employer matches, provide additional financial security, which can enhance retirement readiness. Access to a guaranteed income stream in retirement offers employees stability, which is crucial for retirement readiness. Automatic enrollment also plays a crucial role in preparing employees financially.
Additional research from across all employee groups showed that most (65%) of the respondents expressed an interest in wanting financial education from their employers. Employees expressed a desire for education on calculating retirement savings needs and understanding how retirement benefits will be taxed.
Providing education specific to the employer plan or even linking employees to online retirement needs calculators can help employees better prepare for retirement:
How much to save: Most employees with fewer than 20 years of service were most interested in learning how much they should save before retiring (69% of those with 0 to 9 years and 66% of those with 10 to 19 years).
Tax implications: Those with 20 or more years of service (64%) showed more interest in understanding the tax implications of their retirement plans compared to over half (54%) of employees with 0 to 9 years and those with 10 to 19 years (57%) of service.
Related: Retirement Readiness Index: It’s a wake-up call, as ‘too few’ are prepared
“A financially prepared workforce is a more engaged and resilient workforce,” added Dr. Liu. “By addressing the needs of the workers detailed in our research, employers and policymakers can help craft effective retirement strategies that support employees across all stages of their careers.”
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