Planning key to independence in retirement

By Eileen L. Griffin

A recent Wall Street Journal column attempted to dispel the myth of an impending retirement crisis in the United States. It said most private sector employees are well prepared for retirement, having saved and invested for many years with both employer-sponsored plans and Individual Retirement Accounts. Recent data indicates 61 percent of workers and 80 percent of married couples now participate in a defined benefit plan. Employer-sponsored plans and IRA accounts have been growing at record levels, according to the column. Employers have played a role in the improved overall retirement picture, as many have become more generous in their support of their defined benefit programs for their employees. With unemployment rates at historical lows, this trend is expected to continue as retirement programs have become significant influencers on recruitment and retention strategies for many employers. If this positive assessment is true, then why the hysteria about retirement?

The World Economic Forum reports that 85 percent of the retirement gap in the U.S. is due to government underfunding public pensions. While Americans in the private sector have continued to increase savings and employers have expanded their support of 401(k) and other private retirement plans, the government-managed retirement plans are in disarray. While private sector employers have encouraged and trained their employees to use the 401(k) benefit, many public employees are not offered the same level of communication on saving and investing for retirement. They are expecting that their needs will be met through their government pension plan.

As a result of the contrasting philosophies, we are expanding into two entirely different employment cultures where those employed by the public sector anticipate the “promise” of a pension and those used to managing their own retirement planning are positioned to support themselves in retirement. This different mindset begins early and could result in different perspectives and expectations of government.

One might question how employers became involved in the retirement of their employees, a point in time after they leave their jobs. What level of responsibility does an employer have to prepare their people for retirement?

During market shifts from defined contribution to defined benefit, many employers accepted a role in offering retirement programs, but rather than providing an income, they have become the educator and trainer, leading employees toward conscientious retirement planning and building good habits along the way. 

Employers in wide-ranging industries often will offer training or access to financial and retirement planning information to guide their employees into making good finance and retirement decisions. They do this, not because it is mandated, but because it makes sense. It is good business to encourage self-responsibility and independence, while providing tools to meet that end.

While the private sector has continued to experiment with benefits that improve the lives of their employees, the public sector has largely depended on the antiquated, and unfunded, pension system. The concern this raises, of course, is that the unfunded liabilities will result in many not being provided with the retirement they were promised during their career. Alternatively, the private sector may be “asked” to participate in the support of public sector employees to ensure that there truly is no “retirement crisis.”

Retirement is the wild card of the personal life cycle. No one can be certain what those years hold and there are more potential pitfalls than in the other stage of life. An evolved civil society should care for the weakest among us, including our elderly. Those in their earlier years still can recover from lost income or recoup after a broken promise. They can still go back to work and earn income. Many elderly people can not and have few options for increasing their income.

While we can hope that public pensions will become funded at the necessary levels in the future, it may be wise for all Americans to save and plan for their own retirement. Small employers, particularly, may find it difficult to provide life skills training and personal development when taxed with just keeping up with job skills and job training for their employees. Those employers in the private sector already leading in this area can be a resource for others who do not have the expertise or resources to train their employees on retirement basics.

The difference between retirees in the future may be their choice of employer in the past. It may be that public sector employees will be expected to accept a partial amount of the income expected or they will need to work longer than planned. All retirees should have the opportunity to enjoy the fruit of their labors and the gratification after years of toiling. All retirees should benefit from their contributions with a safe and secure series of golden years. No one wants to see elderly people living in poverty.

While no one person or employer can change the dire situation that the government pension system seems to find itself in, we can consider self-reliability and individual and community resources. To some degree, the public sector crisis can be mitigated by taking ownership of our retirement planning. Regardless of the support we think we should be getting from a government entity, Social Security included, it may be best to consider our own accountability and prepare to be responsible for our own twilight years. That may take some serious discipline during early employment.

The dependence on government retirement programs may be one of the factors influencing the population more willing to accept a system of control and dependence, contrary to our national culture. Before this outlook takes further root in our society, we should consider reflecting on the importance of independence and nature of freedom.

Careful, thoughtful planning and a sense of self-responsibility may be the way individual Americans overcome the potential aggregate crisis. Employers of all sizes can influence the lives of their employees well beyond the years of employment. That employment bond can continue and dividends result in goodwill that can manifest itself in things like recommending the employer to friends, families and neighbors and speaking highly of the company in the community. Beyond the business benefits, just knowing that, as an employer, you guided your employees toward a fulfilling retirement can be gratifying in and of itself.

Eileen L. Griffin has more than 20 years of management experience. She holds a master’s in business administration and is a doctoral student at Gonzaga University, School of Leadership Studies. She serves as the director of wealth management at Gesa Credit Union.