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Now more than ever, retirement savings are at the forefront of many employees’ minds. And the role an employer plays in retirement savings has transformed as a result. However, the standard practice of an organization contributing money to their employees’ retirement savings might not be the desired method.
In its “Role of the Company Survey,” MetLife found that 58% of employees would prefer their employer provide a set retirement paycheck for life. Americans have accepted the shift in responsibility for their own retirement security, as 54% said that individuals are primarily responsible for their own retirement security, compared to 27% who said companies and 19% who said government.
But employees want a partner in their retirement planning and they want their company to fulfill that role, as they were six times likelier to want companies to be more involved — not less — in providing for their retirement security in the next five to 10 years (61% vs. 9%).
While most individuals will likely have retirement savings through a combination of individual accounts, employer-sponsored solutions and Social Security, company-sponsored solutions were preferred. If given a choice to direct their dollars, company-sponsored retirement accounts were vastly preferred by three to one compared to government solutions, as 74% said they would rather set aside part of their salary in a company-sponsored retirement account versus 26% who preferred paying into Social Security. Even when asked to choose between saving on their own or paying into Social Security, going it alone was preferable by 56% to 44%.
“Employees recognize the important role their employers can play in planning for retirement,” vice president of institutional income annuities at MetLife. “They want a trusted partner who can help them navigate retirement security, creating an opportunity for companies to help their employees plan and save.”
Despite being the generation closest to retirement, only 14% of Baby Boomers said they want the government to be primarily responsible for retirement security, while 24% of Millennials feel that way. There is no significant difference between Millennials’ and Boomers’ preferences for steady income in retirement — both groups equally favor a set retirement check from their employer rather than receiving money from their employer to invest on their own.
This similarity shows the recognition of the preference for a guaranteed retirement income, a paycheck in the form of a pension payment from a traditional defined benefit plan, or an annuity purchased using retirement savings from a defined contribution plan, such as a 401(k) plan. The traditional defined benefit plan is fading from the workplace and a less common offering for younger workers, while defined contribution plans are more prevalent for workers today.