State and local government employees considering retirement face many of the same pressures affecting private sector workers.
Pensions may replace less income in the future, health care costs in retirement continue to rise, and many retirees must make mortgage payments and support multi-generational households.
What can government employers do to better position their employees for retirement?
Center Vice President of Research Joshua Franzel recently tackled these issues in a presentation to the National Conference of State Legislatures (NCSL) 2013 Legislative Summit in Atlanta.
Franzel cited the findings of a report, The Evolving Role of Defined Contribution Plans in the Public Sector, he co-authored with Paula Sanford of the University of Georgia Carl Vinson Institute of Government in 2012.
Franzel’s key points included:
- The role of supplemental savings, including supplemental defined contribution plans, will grow as reliance on pensions for retirement income declines. Governments can encourage retirement savings by establishing systems to automatically enroll employees and adjust contribution levels and investments as they progress through their career.
- Employers should strive to strike a balance between providing varied investment options without overwhelming employees with too many choices.
- As governments shift more responsibility for retirement savings to employees and retirees, financial education is more important than ever. Given the variations in education, experience, and situations of the government workforce, employers will need to develop a range of financial literacy programs.
- Employers will also need to decide how extensive to make their programs — should they cover all aspects of an employee’s financial life (retirement, rainy day savings, credit management, mortgage, college savings, etc.) or limit their offerings to job-related benefits?