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It’s Time To Rethink Retirement Security In The U.S.

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Renee Schaaf is President of Retirement and Income Solutions at Principal Financial Group.

In the many years I’ve been in this business, I’ve rarely been so passionate and felt so strongly that now’s the time to rethink how we approach retirement savings and security in America.

Nearly a quarter of U.S. workers have less than $10,000 saved for retirement, sending a clear signal that current retirement systems, created in the 20th century, are not keeping up with 21st-century demands.

A driving factor for modernization is that our demographics are changing. We’re living longer and our population is getting older. We’re growing more racially and ethnically diverse. How we work has evolved. We no longer stay at one employer for 40 years. Job hopping and participation in the gig economy appear to be becoming the norm for both young and old.

But as I look at these changes, I see opportunity. It provides us the chance to retool and remodel how retirement security is built in America. For educational purposes, I’d like to share some of the ways I believe retirement security could be retooled and remodeled in America, based on my experience as the president of a retirement solutions provider.

Creating Retirement Savings And A Security Mindset Through Participation

As an employer, it’s one thing to provide a retirement account to your employees, it’s another to get them to participate. Of the 71% of people who have access to an employer-sponsored retirement plan, only a little over half (55%) of those eligible participate.


As a country, let’s start addressing retirement savings as a part of one’s overall financial picture. Policymakers have put forward additional legislation to help increase participation and overall financial wellness. But no matter the outcome in D.C., there are best practices that can improve retirement outcomes, including:

• Require immediate eligibility.

• Implement automatic enrollment with deferral rates to either the employer match or a minimum of 6%. Participants would have to opt-out not to contribute.

• Implement automatic deferral increases of 1% annually up to 15%.

• Conduct an annual re-enrollment sweep. Participants would have to manually opt out.

And educate employers on other plan tactics that could help people save more, such as:

• Shorten the vesting schedule.

• Contribute to the participant’s account even if the employee doesn’t.

• Allow contributions to a retirement fund if the participant is making student loan payments. (This is based on private letter ruling 201833012, which is only binding on the taxpayer who requested it. The plan sponsor would need to work with their counsel to obtain consent to amend their plan document, provide relevant plan amendment language, and formally request that their counsel service the plan accordingly.)

• Provide guaranteed income investment options.

• Provide automatic enrollment into emergency saving accounts.

Universal Access To Retirement Plans

Over 30% of workers don’t have access to retirement benefits. But this figure doesn’t tell the whole story. Unfortunately, it’s a socio-economic issue in the U.S. You’re less likely to have access to a retirement account if you:

Work for a small company with <100 employees (50%).

• Make a low wage (55%).

Are a person of color (Black 46%, Latinx 65%).

• Work part-time (60%).

Ideally, every worker should be able to participate in a retirement account. The SECURE Act of 2019 was a step in the right direction, providing incentives for small companies to offer retirement accounts and expanding the rules around pooled employer plans (PEPs). But to address the socio-economic issue around access, more needs to be done.

As an industry, we can help provide options, incentives and cost-effective ways for all employers, no matter their size, to be able to offer some type of retirement account to their employees.

To reach the growing Hispanic population, for example, let’s provide retirement account and financial wellness information in a way that meets their unique cultural and language needs. Since 2019, when our financial group began using a bilingual digital enrollment platform, it’s led to an average deferral rate among Hispanic participants of 8%. This data is based on Principal® Real Start data as of June 30, 2021.

And let’s think about technology. Mobile apps are a great start, but there’s a realm of possibilities to use technology to educate, inform and help individuals save more. Digital platforms, videos, automatic savings, FAQs and live chats are just a few ideas. It’s up to us as an industry to build upon what we know and move forward to help close the retirement savings gaps that exist for so many.

Re-Envisioning How We Retire

When it comes to retiring, we seem to take an all-or-nothing approach. Yet not all seniors are ready to go full-time into a life of travel, hobbies and grandchildren — especially if they’re healthy and still feel they have something to contribute to society.

As our population grows older, it’s estimated that by 2060, the percentage of working-age people 18-64 will fall from 63% today to 52%. This could have huge implications for the labor market and the U.S. economy.

Employers, it’s time to create more flexible arrangements for preretirees to help keep them in the job market longer and ease them into retirement. Consider creating roles that include:

• Less stress.

• Fewer hours with more flexibility.

• Remote work, allowing employees to work from anywhere.

• Job-sharing with other transitioning retirees.

• Solutions for healthcare and other benefits, if needed.

As older workers stay in the workforce, there’s an opportunity for the retirement industry to create additional employer-sponsored plan solutions to encourage these older participants to stay within the current plan. Educate them and provide more flexibility related to solutions that can help manage their assets and distributions.

A Time For Action

It’s evident that we have potential solutions to help make a meaningful difference. And it also seems that we have the ears of policymakers in Washington, D.C. It’s now time for everyone to work together and create a world where financial security is accessible to all and help people feel confident that they’ve saved enough for their future.

This article is intended to be educational in nature and is not intended to be taken as a recommendation. 

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