A global retirement crisis is brewing. Statistically, people are living longer than ever before. Since the mid-1900s, life expectancy has been increasing by one year, every five years, on average. That means babies born in 2018 can expect to live to be older than 100. While this indicates great progress for individual and societal health, it also means people are going to have to plan for a retirement that could last 20 years on average — a feat for which many are not ready.
The key to successful retirement planning is simple — save as much as you can and begin as early as possible. Employers offering retirement savings plans are strategically positioned to encourage early saving, but according to statistics from the MetLife Employee Benefit Trends Study in nine global markets, 37% of employees stated they are "somewhat behind" or "very far behind" where they want to be in regards to retirement savings. Employers can address this challenge and simultaneously increase employee engagement around existing employer savings plans and other benefit offerings through simple, easy-to-understand retirement education addressing the misconceptions that prevent employees from saving adequately.
In addition to longer life spans, globally, people are having fewer children, which shifts the dependency ratio (the ratio of people in the workforce to those in retirement) to 4 to 1 by 2050 from 8 to 1 in 2017. These factors have long put social security systems and traditional defined benefit plans under stress. Governments are reducing their investment in social security while employers are moving away from DB plans. Although the majority of retirement planning in developed countries rests on individuals, 48% of employees in both developed and emergent nations still look to their employer to provide some sort of savings vehicle.
A review of four years of global market data from the MetLife EBTS reveals 35% of employees have limited time to do the necessary research to make the right financial decisions for themselves and their families. Today's employees need to visualize the true cost of retirement, which will motivate them to save now. Employers are well-positioned to combat this challenge through improved education methods.