Retirement Coaching Gives Employees a Handle on Future

More than just handing employees a to-do list for retirement planning

By Kathy Gurchiek March 7, 2011

Retirement looks a lot different from decades past when traditional pensions were common, Social Security was a sure thing and people had shorter life spans. Today, with more employees bearing the responsiblity to prepare for a secure retirement, a growing number of employers are offering retirement coaching as part of their benefits package.

“We are seeing an emerging interest in providing more retirement counseling to the rank and file,” said Barbara Hogg, retirement communication leader at Aon Hewitt.

“It implies something different than retirement planning,” she explained. The coach is someone who “can handhold the employee through the process of retirement,” including the logistics of some of those decisions and helping the employee understand the steps along the way.

There has to be more to it, she added, than handing an employee a piece of paper with a to-do list for retirement planning.

Structured properly, coaching sessions are comfortable relationships that can include phone support and follow-up with the coach. The aim: to help workers create and follow a personal plan.

Boomer Retirements on Hold

The oldest of the 77 million Baby Boomers born from 1946 to 1964 will reach traditional retirement age in 2011. But the recession caused many Boomers to delay retirement by at least four more years than originally planned, according to findings released February 2011 from a survey by the American Institute of CPAs.

Delaying retirement, though, impacts the employer financially because it triggers:

Higher wages and associated costs of older workers.

Fewer oppportunties for younger workers to advance, and hence poorer retention rates for up-and-coming talent.

Another reason for the interest is the change in retirement design, with more of the onus on the employee to manage his or her retirement portfolio. “Employees are asking for more help. They don’t have role models of generations before them to get a sense of what they need to do,” Hogg said.

According to Financial Finesse, a California-based company that offers financial education programs to corporations:

In the 1990s, more than 40 percent of employees had pension plans, and pensions made up a large part of their retirement savings.

In 2011, only 17 percent of employees have pension plans, and 14 percent of workers with pensions had them frozen in 2009.

Moreover, employers are concerned that employees lack retirement readiness. A 2010 401(k) survey by Deloitte Consulting LLP found that:

Nearly two-thirds of 600 U.S. employers surveyed think that their responsibility toward employees includes taking an interest in whether they are tracking toward a comfortable retirement.

Only 15 percent of plan sponsors in that survey thought that most employees will be prepared for retirement if they maintain their current status quo.

Fueled by Fear

Fear is one of the drivers for employee interest in retirement counseling, said Michael Smith, resident certified financial planner with Financial Finesse. It’s fueled by talk about increasing the age of retirement eligibility, companies filing for bankruptcy and distressed pension plans being turned over to the Pension Benefit Guaranty Corporation, he said.

“[Employees] understand when they walk into their manager’s office and say ‘I’m done,’ it’s too late to turn back at that point. They realize the significance of the decision, and there’s a little bit of fear out there, especially in this economy.”

Smith meets from one to three times individually with employees at some Fortune 500 companies. During the sessions they crunch numbers to determine if the financial realities mesh with workers’ visions for their retirement. Topics include such issues as debt management and estate planning.

Once the person opens up about the nonfinancial side of retirement, “that’s where we get into all kinds of fun conversations,” he said.

Rude Awakenings

Smith has met with some workers for whom the coaching sessions were a rude awakening when they learned they could not yet afford to retire. Others he’s worked with have a financial planner but want a second opinion.

Sometimes the sessions help guide someone down a new path, such as the accountant who spent his workdays with Excel spreadsheets but at 61 dreamed of turning his passion for cars into a job as a mechanic. After discussions with Smith, the man enrolled in mechanics classes to prepare for his post-retirement career.

A 57-year-old woman decided to retire
one week after her coaching sessions.

Typically, those Smith meets with are one to five years from retirement. One client, though, was a 57-year-old woman who retired a week after her coaching sessions.

Mentally she was ready, but she feared its absoluteness. She was weighing her options of retiring in a week, a month—even in a year or two if she needed more time to save. She knew it was not a decision to be taken lightly, Smith said.

“If I go in to my manager and tell him I’m retiring,” she told him, “that’s real. I can’t change my mind a week later.”

Part of her fear was that she would outlive her retirement funds. She had female relatives who had lived to their late 90s. “Can I blow the candles out on my 100th birthday cake, or will it be a bowl of cat food? I’m terrified of that,” she told him worriedly.

The coaching sessions showed her that she could look forward to many birthday cakes.

“Our conversations allowed her to have the confidence that she could go into her boss’ office the following week and tell her that she was going to retire.”

HR’s Role

Employers interested in putting such a benefit in place should first assess what resources they have and how well employees use and understand them. Then they can identify the gaps that need to be filled, according to Aon’s Hogg.

“What you often are missing is the umbrella over [those resources]. It can tend to be a bit siloed” in the way employees can access each of those resources.

Hogg advised HR:

Think from an employee perspective. Are there ways you can bring it together for them? Are you at least giving them that total retirement picture?

Bring all the components together on an individual basis in tools that can model retirement income. These can include a financial statement showing retirement income and expenses, online retirement calculators or messages about available resources.

Not everyone will want to talk to a retirement coach, Hogg noted. Instead, some might want to use online tools or listen to a webcast to learn how the various pieces of retirement fit together in the context of their plan.

Financial Finesse's Smith advised HR to consider whether the services of a retirement coach are an "add-on" provided by the entity managing its 401(k) plan, and whether those services come with or without a product sales pitch.

Retirement counseling, he said, “might be a blip on the radar screen today, but it might be a huge wave five years from now.”

Kathy Gurchiek is associate editor for HR News. She can be reached at​

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