Inflation and the cost of living crisis has hit everyone hard. Generation Z and Millennials might feel as if getting a mortgage is beyond them, and Generation X might find themselves in “generation sandwich”, trying to look after their immediate family while trying to take care of their parents or the baby boomer generation.
It’s these generations (Gen X and baby boomers) that are being particularly affected by the rising cost of living when they start thinking about retirement plans. Many are finding that they’re dipping into their savings or their pensions to make ends meet, which will mean they will have less to retire on, if they are able to retire at all.
What is the current situation regarding “pension-dippers”?
According to Inews, most pensions in the UK are worth under £30,000, and many who were thinking they could retire at 65 or have already retired are now finding they might have to keep on working or re-enter the job market. Dame Julie Unwin says, “Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong.” In the US, global management consultancy, Mckinsey, say as many as 80% of baby boomers might not be prepared for retirement according to they nationwide survey.
The drawback to retired baby boomers re-entering the job market is that they might not have the digital skills required for some jobs, and the stress of working to be able to make ends meet might push some to breaking point. Financial advisers Unbiased say that 63% of Brits don’t have an idea of what a pension pot should include and that retirement requires planning. In Unbiased’s survey, they found that 71% say they won’t be able to retire before the age of 66.
So what has been done, or being done, to help ease the burden on baby boomers?
In the UK, some measures have been brought in by the government like the cost of living payments and energy / tax credits, while other governments in the EU have made other changes (e.g., Germany reducing train fares, Spain lowering VAT on electricity). What can really make a difference to employees are benefits employers can make available. Here are some of the ways in which an employer can help employees navigate their way through these troubled times of high inflation, and avoid pension-dipping:-
Offer personalized advice as an employee benefit.
Employers can make this benefit available at low cost and can be offered across whole organizations. When employees know that they can access financial advice at any time, they will feel more secure in their employment and won’t fear retirement as much.
This is along the same lines as the first but shouldn’t be made available to the oldest employees. Retirement advice might seem a far-fetched idea and a long way off for younger employees to even consider, but making it available strengthens an employer’s benefit offering, and might even be a reason for younger employees to stay working for an employer longer.
This is becoming quite a new trend especially in the US, and involves decumulating assets in order to maintain quality of life when you retire. There are many ways in which someone can do this, and is made easier with digital tools that automate processes for you (such as tax-smart withdrawals from e.g., 401(k) in the US). For more information, read an article on Forbes.
Offering family healthcare benefits.
Alongside flexible work as being a good benefit for the sandwich generation, family healthcare is something employers should think about making available through their digital benefits platform. If an employee knows that their family members are catered for through their work benefits, then it’ll be much easier to retain them, especially during times of “The Great Resignation”.
There are more benefits employers can provide to ease the fears that some older employees have when they think about retiring and whether they can actually do that or not. Employers shouldn’t leave it until an employee is forced to sell their house in order to make ends meet, or wait until they get a call asking if they can come back to work again after deciding to retire. Making benefits available will put employees’ minds at rest – young and old.
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