The Changing Retirement Landscape and Retirement Readiness

Most of us to some degree have worried, stressed, or thought about having enough money to retire comfortably. Retirement readiness is the ability to be financially prepared to retire. We, as employees, want the standard of living we have now to continue into retirement. It’s important to have the financial health to choose to retire.

No clear consensus exists on how much income adequately replaces pre-retirement standard of living. On average, a suitable barometer is 75% of pre-retirement income. Because of different tax levels and personal expenses changing from working status to retirement, full income isn’t needed. Final income replacement will be a personal preference, but 75% of pre-retirement income is something to aim for in your outlook of retirement.

When I started in the real world out of college, any time retirement was discussed, an analogy of a three-legged stool was used. The legs were employer benefits, Social Security, and personal savings, with each playing a relatively equal role when planning for retirement.

Unfortunately, through the years, each one of those legs deteriorated. Let’s take a look at each:

Employer benefits

  • Defined benefit plans from the employer provided a stable source of income for retirees. Now, most employers offer defined contribution plans. Defined benefit plans have decreased quickly since the early 90’s, while defined contribution plans have remained steady. The change has shifted the financial risk from employer to employee.

Social Security

  • According to the Social Security Administration, in as little as 15 years, if no changes are made to taxes or benefits, your scheduled payment would be reduced by 25%.

Personal Savings

  • Personal savings are critically low for many reasons, ranging from increased employee benefits costs to lifestyle behaviors. Some of the most telling stats revolve around available monies:


The legs of the stool aren’t as stable as they once were. But these income streams are necessary to retire with confidence from the workforce. A 4th leg of the stool is starting to become a tool for retirement—income from working into or through retirement.

According to a survey by the Employee Benefit Research Institute, 79% of US workers expect to supplement their retirement incomes by working for pay. A byproduct of this new income stream is the ability to stay healthy at older ages.

What does retirement look like for your employees?

If you’re paying for unhealthy workers who stay on the job past retirement age, then your healthcare costs are likely increasing. If any of your workers are delaying treatment or preventive services, or not adhering to their medication regimens, your costs could be even higher—chronic conditions are the highest cost driver for most employers.

This is yet another reason to have all your data under one roof to holistically review and analyze your data.

Brandon Conroy

Brandon Conroy

Brandon Conroy, ASA, FCA, MAAA, is a leader in developing and implementing new tools and strategies that reduce client risk. He’s developed and implemented an interactive healthcare cost projection model, underwriting templates, renewal presentations, IBNR tools, a health plan chooser tool, and financial wellness education models. Brandon left Innovu in February 2019 to pursue other interests.

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