Nearly 70 Percent of HR Professionals Polled Say Employees Plan to Delay Retirement

Sep 22, 2009
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Weak 401(k) performance and stagnant household income to blame

Alexandria, Va. Human resource professionals say the recession is causing many employees to delay retirement and reduce or suspend 401(k) contributions, according to a recent poll by the Society for Human Resource Management (SHRM).

Roughly 68 percent of HR professionals polled said the number of employees planning to delay retirement due to the recession has increased during the past 12 months. The findings are detailed in the SHRM poll, “The U.S. Recession and its Impact on Employee Retirement.”

“The recession is brutal with aftershocks to be felt for sometime as employees and employers adjust to a new economy and financial landscape impacting business operations, careers, and personal finances,” said Steve Williams, SHRM’s director of research.

Sixty-seven percent of HR professionals polled reported that the number of employees planning to reduce 401(k) contributions also increased during the past 12 months, while 62 percent reported the same regarding employees who have suspended contributions. Only 10 percent said employees were planning to increase 401K contributions.

Nearly half (49 percent) of HR professionals said they’ve seen an increase in the number of employees asking for advances on their 401(k) savings. Also, 16 percent reported the same of employees asking for advances on their wages.

In another sign of recession times, 26 percent of HR professionals polled report an increase in the number of employees having their wages garnished by collection agencies during the past 12 months.

The poll also shows that employees are being proactive about personal financial recovery, with 47 percent of HR professionals saying the number of employees requesting more information specific to investing/retirement planning has increased during the past 12 months.

HR’s response

The overwhelming majority (72 percent) of HR practitioners polled report they will “most likely” offer employees educational literature and presentations specific to investing/retirement planning in the bleak economy.

Other solutions HR professionals reported includerevising investment policies for their company’s 401(k), pension plan (21 percent); changing 401(k) and pension plan investment management companies (13 percent); offering additional investment options for employees (10 percent); and suspending investments in mutual funds determined to be too risky (eight percent).

“HR’s response in offering solutions and closing the financial literacy gap on retirement is essential,” said Williams. “Retirement issues impact all generations, not just those for whom retirement is near.”

The HR practitioners polled told SHRM that 41 percent of their employees are both Baby Boomers age 45-64, and Generation X age 29-44.”

Seventeen percent of employees are Millennials and Generation X, age 28 and younger. Only six percent are veterans – also known as Traditionalists and the WWII Generation – age 65 and older.

Additional highlights of the 12-question poll include:

  • When asked about the biggest threat to employee retirement savings, 32 percent of HR professionals said “the instability of the financial markets,” and 32 percent cited “employees are not saving enough for retirement.” The third biggest threat is employees’ lack of financial literacy in understanding retirement options – 14 percent of HR professionals cited this concern.
  • Roughly 35 percent of HR professionals say their organization automatically enrolls employees into a defined contribution retirement savings plan, such as a 401(k) plan.
  • When asked, “In your organization’s automatic enrollment plan, what is the default percentage of salary deferred?” HR professionals said: two to four percent of salary (68 percent); less than two percent of salary (21 percent); five to seven percent of salary (nine percent); and eight percent or more of salary (two percent).
  • The poll shows that few employees have opted out of their organization’s automatic employee deferral rate with 79 percent of HR professionals reporting no increase compared to 21 percent who report a rise.
  • Of the 21 percent of HR professionals who see an increase in the number of employees opting out of their organization’s automatic employee deferral rate, 26 percent work in large organizations while 19 percent are with medium-size organizations, and 23 percent are in small organizations.

The poll provides a snapshot of recession-sparked retirement and 401(K) trends HR professionals are observing in their organizations, generally. Polled were 563 HR professionals across the country.

Reporters may read the complete SHRM poll, and other surveys, at: http://www.shrm.org/Research/SurveyFindings/Pages/default.aspx.

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About the Society for Human Resource Management

The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human resource management. Representing more than 250,000 members in over 140 countries, the Society serves the needs of HR professionals and advances the interests of the HR profession. Founded in 1948, SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China and India. Visit SHRM Online at www.shrm.org. Follow us on Twitter at: @SHRMPress
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