The pandemic has had serious financial implications for many employees, forcing some to recalibrate their short- and long-term goals when it comes to retirement.
Employees seem torn over the best path forward, with some choosing to retire early while others plan to work longer to make up for lost income during COVID. Employers are left stuck in the middle, working to cater to these disparate groups.
“The biggest challenges that employers seem to be facing is creating educational opportunities for those employees that are approaching retirement,” says Brad Hindman, a financial adviser with Wells Fargo. “If the goal is to make them feel confident and comfortable with their decision to retire, employers should meet them on their terms.”
Older workers have more concerns about not having enough time to financially recover from COVID’s impact, with 34% of employees ages 68 to 70 planning to delay their retirement, according to research from The Pew Charitable Trusts. On the other hand, more than a quarter of all employees say COVID has spurred them to move up their retirement dates, according to the National Institute for Retirement Security.
“The pandemic has amplified some people’s desire to retire earlier and caused this epiphany moment for a lot of people, where they step back and say, ‘You know what, I need to make a change,’” Hindman says.
Hindman shared his thoughts on how he has seen COVID impact retirement planning, steps employers can take to better educate employees on retirement and financial wellness, and the biggest financial lesson from the pandemic.
Have you had clients change their retirement timeline as a result of COVID?
I’m thinking specifically about clients in the utility space, like natural gas companies and electricity providers, where there were layoffs and shutdowns that did affect people in a financially significant way. In most of those cases there were some unemployment benefits that helped ease the burden. However, it’s not the same as working, so they did have to dip into savings and retirement accounts, which ultimately delayed their retirement. Having to take on additional debt does leave them in a situation where they may have to work longer.
How can employers help those employees who are struggling financially, to help them better secure their retirement years?
It’s really about employee education, which can be a difficult thing to do from an employer perspective because you can’t always get a high level of participation. There’s a lot of great website material out there for employees through their 401(k) plans or HR, but the HR people that I talk to say that it’s not being utilized as much as it should be. It’s not because it’s not good information, it’s just not making it into the hands of the people that need it most. There are various reasons for this. Our average client age is around 62, so it could be they’re just not as tech savvy as younger generations.
[At Wells Fargo,] we’ve paired with HR people to come in and do some general education around finance. We discuss things employees need to consider when approaching retirement, like costly mistakes to avoid, and how healthcare benefits will work after they retire. The employers that we work directly with say that when coming in to try to help educate clients, that face-to-face interaction is really what gets people to make changes.
What is the biggest financial lesson that’s come out of the pandemic?
You’ve got to go back to the basics. When I think of financial wellness, I think about being prepared for the things that may happen that aren’t necessarily good. It’s about building emergency savings or healthcare savings accounts and really educating employees about doing that.
Employees don’t always trust their employers, and sometimes when things are being put out there for their benefit, employees think there’s an agenda. So it just goes back to having good relationships with employees and fostering those things educationally that will build up that trust and result in better outcomes for both sides.