Americans will live longer in the coming years, but they may not necessarily have to work longer to earn income for those additional years.
That’s one of the takeaways from a report on economic resilience and longevity produced by John Hancock Retirement based on a separate panel of U.S. retirement plan participants and retirees.
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According to the study, 62% of retirees surveyed left their workplace earlier than expected, resulting in less time to save in a workplace plan and expanded financial needs in retirement. Wayne Park, CEO of John Hancock Retirement, said the study found that workers expect to work four years longer than they would like to save more for retirement. , but said it also found that the choice may not be entirely in their hands. , part of Manulife Investment Management.
“You might like to think that people are retiring early for the right reasons, but unfortunately that’s not always the case,” he says. “It could be an employment reason, it could be a health issue.”
According to the same study, 72% of people who retired earlier than expected said they wished they had saved more before retirement. In contrast, 47% of those who retired as planned said they wished they had saved more.
These early retirements and longer lifespans will lead the retirement industry and employers to focus on helping people make the most of their working years to save and prepare for retirement, Park said. It says that it will be.
5 A’s
wayne park
Retirement CEOs categorize key areas of support into five “A”s.
access to retirement plans; automated plan design elements; activating participant engagement; investment alpha; and financial advice.
Regarding the first point, Park said the industry must continue to work to expand employees’ access to tax-advantaged retirement savings plans, as the SECURE 2.0 Act of 2022 will provide tax-advantaged retirement savings plans. This is an area that we are trying to address through this and other regulations.
Secondly, we continue to implement automatic enrollment and automatic escalation in our plans to get people to save, which is also supported by law, he points out.
However, the third area is more complex. Get participants involved and actively manage their savings.
“At some point, you can’t automate everything,” Park says. “We also know from our own communications that at least those who open the email or have some kind of engagement (participants) are proven to save better and definitely have higher savings rates. Understood.”
Park said driving and sustaining engagement is a key focus for John Hancock as recorder, as well as in conversations with advisor intermediaries. He said John Hancock Retirement, unlike some of its record-keeping competitors, does not provide advice and is a “partner of choice” for advisors when working with plan sponsors and participants. He points out that he thinks it is.
The fourth area noted by Park is providing participants with a strong investment strategy, both from a growth and allocation perspective.
Finally, personal planning advice is important for participants at all income levels, not just the wealthiest savers.
“There’s not a lot in the plans at the moment, but we’re looking forward to more advice,” Park said.
About 80% of participants with advisors said they were in good financial shape, compared to 52% of those without advisors, according to John Hancock’s research. On the other hand, having a comprehensive retirement plan appears to strengthen financial sentiment, with 78% of those with a plan reporting good financial health, compared to 78% of those without a plan. 54% of people said they were in good financial health.
Please help me
Park acknowledges that these findings may be skewed because people who can afford to hire a financial advisor also tend to be in better financial shape. But he believes advances in technology have expanded the pool of people advisors are willing to work with and take on as clients.
“Even if it’s not a formal definition of advice,[employers]can provide some support, whether it’s content, rules of thumb, or creating engagement,” he says.
Meanwhile, he believes employers can provide more education and guidance through tools and resources from record keepers and advisors working on the plan.
Research shows that Park’s five elements for supporting participants do appear to be necessary.
When survey respondents shared their retirement preparedness across generations, the results were low. Only 36% of baby boomers say they are ready, while 27% of millennials and Gen Z feel like they are on track, and 26% of Gen I feel that there is.
The John Hancock Study on Economic Resilience and Longevity was conducted in June and consisted of 2,623 John Hancock Plan participants and 525 retired Americans.
John Hancock Retirement focuses on research and solutions around longevity and retirement, and this year signed a five-year agreement with the Massachusetts Institute of Technology’s Age Lab on projects such as creating the Longevity Readiness Index.
