Helping Participants Navigate the "New Retirement"

Financial pundits have been talking about the “new retirement” for years. But what does that mean now, in the wake of the Great Recession? With the sands of the retirement landscape continuing to shift in 2010, the answer remains uncertain -- and the possibilities are unsettling.

Uncertain Outlooks

Until relatively recently, millions of workers dreamt about -- and expected to enjoy -- a new type of later-life affluence made possible by ever-rising home and stock prices. Today, however, many of those same people feel trapped in a nightmare as they struggle to pay their mortgages and worry about being able to afford to stop working. Instead of viewing retirement as a leisurely and secure phase of life that will begin on their own terms, many now expect to retire only when they are no longer able to find work.1

Unfortunately, recent market gains haven’t been enough to dispel the gloom. Despite the market’s 2009 rally, the average 401(k) account balance remains 11% lower than it was prior to the beginning of the recession in 2007, according to research from Hewitt Associates. Today, most workers (54%) have set aside less than $25,000 for retirement, not including the value of their homes and any defined benefit assets. Even more alarming: More than one-quarter of the workforce (27%) has saved less than $1,000.2

And while many plan participants appear to be staying the course, an important question remains: Are they only doing so because they have become disengaged with the retirement saving process or too paralyzed with fear and confusion to touch their accounts?

Confidence has also failed to rebound significantly with a rising market. Only 16% of workers are now “very confident” about having enough money for a financially secure retirement, and just 19% of retirees feel the same way.2

With these trends in mind, plan sponsors and providers should consider their strategies for the next “new retirement,” even if it hasn’t fully revealed itself yet. In the meantime, it’s safe to say that maintaining a long-term emphasis on participant communication and education can help workers navigate uncharted waters more confidently, securely, and productively.

1Hearts & Wallets, Rethinking Retirement, Investor Trust, and the Value Proposition, 2010.

2Employee Benefit Research Institute, 2010 Retirement Confidence Survey, April 2010.

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