Key considerations for CA P sponsors to help their employees transition to retirement.
It is amazing how quickly life can sneak up on you. One minute, you are a youthful 40-year-old and then, almost overnight, you are receiving mailers about your golden years in retirement! Just like those first silver hairs, this can be a tardy wake-up call for plan members.
Sponsors of capital accumulation plans (CA Ps) hope to engage members long before this turn of events, providing educational materials, seminars and decision-support tools to help them with these challenges. The transition to retirement is more than just a numbers exercise. The realities of retirement and aging entail a different set of needs as the member’s daily life, health and budget all undergo change.
Communications: Getting the Message Out
First and foremost, plan members need information and support in a variety of formats to help them realize that they are truly on the threshold of a new lifestyle. These communications can be delivered by various means—for example, age-targeted mailings, seminars, phone-in consultations or transition-targeted support materials.
Tools: Mastering the Numbers
The way we define retirement is also changing, driven by demographics and economic realities. For example, we now have increasing numbers of employees transitioning to semi-employed retirement, through either contract relationships or part-time and phased situations. No matter what the situation, the planning process should start early and be driven by realistic expectations.
There are tools that can help. A robust retirement planner will allow members to look at different scenarios, projecting income at different contribution levels, alerting them to potential corrective action to help them achieve their goals and tracking how long their investments will last based on a particular lifestyle. Plan members should acquire external financial advice specific to their requirements. Additionally, they will need tools to help budget for new personal needs—especially healthcare costs, as well as debt management and paydown and, in time, perhaps some form of assisted living. These tools can provide comfort and minimize the guesswork involved, potentially also reducing the burden on others as the plan member ages.
Investment Choice: Providing Secure Income and Growth
Investment options, too, are transforming quickly to meet the needs of exiting plan members and aging demographics. Most often, these needs include a steady, reliable income, an inflation-fighting component (since seniors live much longer now than ever before) and, whenever possible, a legacy to leave to children, grandchildren or a charity.
There seems to be a genuine desire among plan sponsors to prepare their members for a smooth retirement transition. While they do not wish to increase fiduciary duties or costs, they are aware of the need to assist with planning and to facilitate the CA P member’s transition from the accumulation phase to the de-accumulation phase. In some cases, the plan sponsor may even be able to provide a financial advantage to its retiring members, such as reduced investment pricing and other services that they would not otherwise have enjoyed.
Helping plan members with the transition to retirement is becoming an increasingly important focus for CA P programs. Support from the plan sponsor at such a challenging time can make a world of difference, assisting plan members both psychologically and financially in coming to terms with a new phase of life.
Joan Johannson is president and managing director of Integra Group Retirement Services. jjohannson@integra.com
© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the January 2009 edition of BENEFITS CANADA magazine.