Are Employers Prepared for the Aging of the U.S. Workforce?
By William J. Arnone
In anticipation of an aging workforce, human resource (HR) executives across some of the largest U.S. employers are taking a variety of approaches. After describing population trends, this article reports survey results revealing HR executives' varied responses to questions about human capital management, identification and transmission of business wisdom, retention of key employees and preretirement planning. It then discusses the business case for practices that help employers best manage an aging workforce, including succession planning, transmission of business wisdom through benefit design, and retention programs for older workers.
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The New Retirement Reality: Calculating the True Cost of Retirement Income Adequacy
By Lori Lucas and Allen Steinberg
Recognizing that 401(k) plans are emerging as many employees' sole source of employer-sponsored retirement income, plan sponsors are increasingly adding paternalistic plan features to increase the amount—and effectiveness—of dollars invested in 401(k) accounts. The authors describe changes taking place in 401(k) plan design. Then, from a database of 1.8 million 401(k) participants, they estimate retirement income adequacy for participants as a whole and among subgroups, based on whether the participant contributes, type of retiree medical coverage and the presence of a defined benefit pension. Finally, the authors discuss how plan sponsors can bolster the adequacy of retirement income from 401(k) plans, depending on employer objectives.
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Designing 401(k) Plans That Encourage Retirement Savings: Lessons From Behavioral Finance
By John Turner
Some workers have not participated in 401(k) plans because of confusion over investment decisions, while other workers who have participated have made what appear to be poor decisions when investing their plan assets. This article uses research in behavioral finance and reviews the existing economic literature to analyze the decisions workers make, the reasons why workers make poor decisions concerning their 401(k) pensions, and policy options to deal with those problems. Options include methods to encourage participation among workers offered a 401(k) pension, encourage higher contribution rates, influence choices concerning investment decisions and influence choices concerning the form in which benefits are received.
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Social Security Replacement Rates for Alternative Earnings Benchmarks
By Olivia S. Mitchell and John W. R. Phillips
Social Security reform proposals are often presented in terms of their differential impacts on hypothetical or “example” workers. This article explores how different benchmarks produce different replacement rate outcomes. The authors use the Health and Retirement Study (HRS) from the University of Michigan to evaluate how Social Security benefit replacement rates differ for actual versus hypothetical earner profiles, and examine whether these findings are sensitive to alternative definitions of replacement rates. They conclude that more precise analyses of possible distributional patterns from Social Security reform proposals would follow if benefit estimates were derived from actual earnings profiles, rather than hypothetical scaled patterns.
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Income and Poverty Among Older Americans
By Debra Whitman and Patrick Purcell
Older Americans are an economically diverse group. This article describes the sources and amounts of income received by the 35.2 million Americans aged 65 and older living in the community in 2004, as reported in the March 2005 Current Population Survey. The distribution of income from Social Security, pensions, assets, work and public assistance among older individuals is presented, as well as the share of older people with family incomes below the federal poverty threshold.
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It's Time To Rethink Employee Benefits
By Andy Hiles
Employee benefits are simply not working. In response, an increasing number of companies are developing strategies that integrate all benefits— health care, retirement, work/life—into one consistent and cohesive plan, a total benefits strategy. Taking into account changing workforce demographics and common employer difficulties with traditional benefit management approaches, this article shows how a well-executed total benefit strategy will support business goals and, at the same time, engage employees in a partnership to address their own immediate and long-term needs.
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