Employee Retirement Plans

Retirement planning has always been an important aspect of modern employment. Planning for retirement follows the same format it has for some time – employees continue to work and save to ensure their security when they are no longer actively employed. However, modern employee retirement plans are considerably more challenging than they used to be.

This blog will serve as a definitive guide to understanding how employment market behavior has changed how employees plan for life after retirement. Read on to discover more.

Options to Plan for Retirement in 2022

How should employers assist workers with their retirement planning? There are several different avenues to explore. Typically, employers should start by putting together the necessary policies and resources to educate their workforce on things like federal or state-mandated retirement ages, federal employee retirement plans, and retirement contribution plans.

In addition, businesses need to put effort into building literacy or awareness among their workforce when it comes to the most common accounts/investment options in the context of retirement. These can include:

Federally Insured Savings Accounts

A federally insured savings account is one of the safest investment options available for retirement planning. These accounts typically carry a much lower yield than other long-term savings options, but they are secured by the federal government, and the funds remain uninvested in volatile instruments like bonds or a stock portfolio.

This insulates them from the market risks specifically associated with other more aggressive investment channels.

Traditional IRA Investments for Retirement

The traditional IRA (or individual retirement account) is an investing tool with several tax advantages to help employees build up their retirement savings. The IRA is typically dependent on individual contributions, instead of shared contributions and matches from employer and employee.

It is important to note that said tax advantages don’t imply “tax-free” savings, but any contributions made into the account are tax-deductible.

Conventional 401(k) Plans

The conventional 401(k) is another tax-advantaged instrument commonly used for employee retirement plans. Contributions to a 401(k) account are typically higher than those in an IRA because most employers match an employee’s contribution, either in full or in part. However, employees will have to pay tax on the total amount when they begin their withdrawals.

Simple IRA

401(k) accounts are a great way for employers to attract talent, including talent sourced through third parties like mortgage recruiters. However, offering 401(k) options can be expensive, and are not sustainable for every employer. These businesses, however, can still offer a SIMPLE IRA account.

Savings Incentive Match Plans for Employees function in a way that is very similar to the conventional 401(k) account. However, individual contributions, as well as employer contributions, are capped at a lower rate than conventional 401(k) accounts.

Additional Retirement Savings Tools

Other than the conventional tools listed above, employers can also look into similar tools to help make employee retirement plans easier and more sustainable. These can include:

  • Roth IRA
  • Roth 401(k) Plans
  • Simplified Employee Pension Accounts

Challenges in Modern Employee Retirement Plans

Increased Life Expectancy

The biggest challenge to planning for retirement is a longer life expectancy. Compared to prior generations, advancements in medical and health sciences, workplace safety, and an emphasis on mental/physical well-being have resulted in a longer life expectancy. In some cases, this necessitates retirement for individuals living well into their 90s.

On the other hand, changes to life expectancy does not necessarily mean that the average retirement age has increased proportionately. For example, manufacturing firms that have older employees working on heavy machinery could potentially be exposing them to a potential injury or a safety hazard.

These risks might be far less frequent for younger employees working in identical roles. As a result, businesses in the manufacturing industry will continue to rely on manufacturing staffing solutions to keep a steady flow of incoming talent instead of retaining older workers on the factory floor.

Lower Financial Yield Rates

The yield rates on financial instruments have consistently seen a decline. This is particularly true of bonds and other instruments that promise a fixed income to owners. As a result, investing in bonds and fixed-income instruments doesn’t offer as high a return as it used to. By extension, it can make planning for a comfortable retirement much more challenging.

Recent Health Crisis

There have been many disruptive events over recent years, but the Coronavirus pandemic is unprecedented in terms of its scope and scale. The health crisis it perpetuated has placed a greater strain on healthcare providers and infrastructure.

Of greater concern is the fact that the rising costs of healthcare services have prompted many individuals to plan for contingencies that typically did not exist a few years ago.

Changing Employment Benefits

Retirement benefits or pension funds used to be a defined part of the compensation and benefits package most employers offer. These defined benefits traditionally played a key role in many talent acquisition strategies.

Modern employers have been moving away from these models, however, favoring contribution-based plans instead. Where defined retirement or pension plans offer a fixed sum of money post-retirement, contribution plans can be far more sensitive to fluctuating market dynamics.


What is a supplemental employee retirement plan?

Usually reserved for top-level executives, a supplemental retirement plan is in addition to an employer’s existing standard retirement plans.

What are the three most common types of retirement plans?

401(k), traditional IRA accounts, and SIMPLE IRA accounts are the most common types in 2022.

Can you ask an employee when they plan to retire?

Employees cannot be forced to retire, and repeatedly asking an employee can be considered age bias or discrimination.

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