Survey: The Most Important Benefit Employees Want Their Employers to Focus on Is Retirement

News flash, although not to people who follow my ramblings, employees want their employers to focus on retirement benefits. Not flexible work, not health benefits, but retirement. And of workers whose top priority in the survey is retirement, more view a guaranteed lifetime income benefit as a high priority than anything else.

The National Association of Plan Advisers (NAPA) wrote an article on this survey done by a former employer of mine. Curiously, many retirement firms in other publications seem to be telling employers not to focus on retirement benefits. Perhaps I am reading their materials incorrectly.

The data in this survey screams one thing: Defined Benefit Plans (DB). This does not come as a surprise to me. I've been saying this for at least 30 years. The average worker does not have the combination of discipline to save and financial acumen to invest in ways to build up sufficient assets on which to retire well unless the financial markets really cooperate.

Today, the trend is to try to make 401(k) plans work like DB plans. Have I got another news flash for you: they don't; they can't; they never will!

We'll come back to this, but let's look at some snippets from the analysis of the survey data. And, please note that the survey was done in the December 2021 to January 2022 timeframe. That was before inflation really started spiking, before interest rates started jumping, and before the equity markets visited the narrow whole in the toilet.

36% of workers earning $100,000 or more per year are living paycheck to paycheck. That's double the percentage just one year earlier. 

Then it gets more shocking. Last year, 26% of the survey respondents took out a 401(k) loan and 36% fell behind on their utility bills, rent, or mortgage. And, for all the people who fell behind on their mortgages who have adjustable rate mortgages, it's getting worse ... much worse.

What do you think those people will do? They'll have to do something. They'll have to cut back somewhere. While it's not in the survey, you watch. Many of those 36% will or already have cut back on their 401(k) deferrals.

Which benefit do these people want the most focus on? Drum roll please.

44% view retirement benefits as a top priority, 39% flexible work, and 33% health. One-third more are focused on retirement than on health during a global pandemic. As the late great Mel Allen would have told you, "How about that?."

Of the survey respondents who labeled retirement a top priority, 62% want a guaranteed retirement benefit (that is spelled D-E-F-I-N-E-D B-E-N-E-F-I-T for those who are not listening), 58% want more generous retirement benefits and 53% want retiree medical. Nowhere in that do I read making 401(k) plans work like something they are not.

Nothing that I've commented on here is the least bit surprising. 401(k) plans were never intended to be a primary source of retirement income. They were never intended to provide lifetime income. They were intended as tax-favored retirement savings. The thought is that if you give someone a tax break to do it, when they are able, they will save more for retirement. It's a good concept. Giving insurance companies a windfall with rip-off in-plan annuities is not as good a concept.

I know, DB plans are bad for employers because they are expensive and the costs are volatile. But, they don't have to be.

Defined benefit plans can be designed at whatever cost level an employer considers affordable. And, modern designs are such that when properly designed, the costs do not need to be volatile. In fact, they can be far less volatile than the maybe not so treasured (according to the survey data and remember I had nothing to do with the survey) 401(k).

Get with the program people. Listen to what your employees are saying they want. If your consultants haven't told you how you can do this cost-effectively and cost-consistently, call me. Google me. I'll take your call. Quite happily, in fact.