Evaluating Employee Retirement ReadinessEvaluatingEmployeeRetirementReadiness

Overview

A prominent company sought to gauge the retirement preparedness of its employees, following substantial revisions to their benefits program and recognizing that a considerable segment of their workforce wouldn’t receive pension benefits. The company collaborated with PGIM DC Solutions to conduct an extensive analysis using PGIM DC Solutions’ retirement income model to determine actionable next steps.

Key Partners

• Corporate Employer DC Investment Team
• Corporate Employer Human Resources Benefits Team
• PGIM DCS Research and Client Solutions Team

Challenge

As part of this company’s initiative to evaluate retirement income products and solutions for their 401(k) plans, their DC Investment Team realized that they lacked an understanding of their employees’ retirement income goals and retirement readiness – a key step in their evaluation process.

Approach

To ascertain if employees were on course to achieve their retirement goals, the company’s DC Investment Team partnered with PGIM DC Solutions to analyze participant demographic data and identify personalized retirement goals, focusing particularly on employees without pension benefits. This analysis provided the company with personalized retirement income projections for each of their participants and delineated between essential and non-essential income (i.e., needs and wants). This provided a clear view of individual readiness and highlighted areas for potential improvement and focus across different segments.

Solution

PGIM DC Solutions presented its findings to the company’s DC Investment Team and HR Benefits Team, identifying four main actionable items for the plan sponsor. 

1. Savings: For younger participants with a longer time horizon until retirement, increasing savings to receive the full company match can greatly improve retirement readiness expectations.
2. Investments: The 401(k) plan will be crucial for providing income to meet retirees’ essential income needs, which supports offering investment strategies that address the unique needs of retirees, including managing inflation and downside market risk.  In addition, given the varying participant profiles and low tenure, a more personalized approach that allows for participant engagement may benefit both pre-retirees and retirees. 
3. Education: We believe it is vital to educate participants about the benefits of postponing Social Security claims, which can significantly impact their retirement outcomes. Transparency about projected retirement incomes and actionable steps to enhance retirement readiness is also critical.
4. Retirement Spending: Offering advice on managing spending and withdrawal rates throughout retirement can help ensure a sustainable income that aligns with individual needs and goals.

 

Case studies are provided for illustrative purposes only and results may vary.