Exploring ways to alleviate the retirement crisis

Over the past few decades, the state of retirement in the U.S. has shifted dramatically. Many full-time workers used to have a defined benefit (DB) plan to rely on, but now only 13.5% of working Americans have a DB or cash balance plan. While 77% of retirees report having enough savings to live comfortably, only 43% of non-retired Americans expect financial security when they retire.

What has been driving these significant changes? Two contributing factors are the widespread adoption of 401(k) plans and increased employee turnover. Before the 1980s, many American employers offered DB/pension plans. Employees were also more likely to stay with an employer for decades, if not their entire career. Now, people are more likely to have a DC/401(k) plan that can be easily rolled over when starting a new job. Unfortunately, we are now seeing that these plans do not offer enough savings for many prospective retirees.

"We grew up with the American dream, and part of that American dream was we were going to get to retire and live a nice long retirement on our terms," O3 partner John Lowell told Broadcast Retirement News. "We're not seeing it."

Address employee turnover issues

Employers also need help to keep employees. Not only is turnover frustrating for employers, but it is also expensive — costing U.S. businesses more than $700 billion in 2021. The price of just one employee resignation can vary greatly depending on the job and industry, but on average, it adds up to 33% of the job's base salary.

Businesses can distinguish themselves in the competitive talent market through an outstanding retirement program that helps employees achieve a comfortable retirement. A robust package that can be personalized to fit every employee's unique needs across generations and demographics. What's the answer? An innovative program that combines the best of DC and defined benefit (DB) plans to create a hybrid plan that meets the needs of today's workforce.

A new path forward

How does it work? It starts with two retirement accounts: a core benefit and a supplemental savings account. Why is having two accounts important? The employer controls the security account, so it's essential to have a separate personal savings account (similar to a 401(k)) that the employees manage to fit their unique needs.

Once a strong retirement program is in place, it's critically important that you communicate it to your workforce well and frequently. It's only worth the cost if your employees know how valuable the program is. Businesses must emphasize the core benefit while acknowledging that every employee's circumstance is different, so we also provide an additional savings account — empowering employees to reach their goals.

"Communicated properly, it's a really, really powerful message," Lowell said. "I think we're building a benefit that you can mold around your own needs, not around the needs of the person at the desk next to you or the person on the other end of the Zoom call."

With innovative programs, businesses can be a part of the solution to the American retirement crisis by helping their employees reach their goals.

Find out more about these plans when you speak to a consultant.