Employers' (Lack of) Response to the Retirement Income Challenge

Employers have long had a significant impact on workers’ retirement prospects. Aside from Social Security, employer retirement income plans are the most important source of income for the great majority of retirees. How long workers can stay employed also largely depends on employer hiring and retention and retirement decisions. Both of these functions – retirement income support and the separation process – are now in flux given scheduled declines in Social Security replacement rates, the shift from traditional defined benefit pensions to 401(k)-type defined contribution plans, and the decline in career employment relationships. To assess the employers’ response to changes in retirement income support and the work-separation process, the Center for Retirement Research at Boston College conducted a nationally representative survey of 400 employers. The survey was conducted in 2006 and focused on the employers’ response to the prospects of employees in their 50s. As reported in previous Issue in Briefs, the survey found that employers expect: 1) half these employees will lack the resources needed to retire at the organization’s traditional retirement age; 2) one out of four will respond by wanting to stay on the job at least two years past that traditional retirement age; but 3) the employers are lukewarm about creating opportunities for even half of these employees to work longer. Note that the survey was conducted well before the financial crisis; the retirement preparedness of workers has deteriorated since the survey – making potential employer responses all the more important...