By Kathryn Kretschmer-Weyland
May 7, 2007

Key Retirement-Planning Trends Retiree health care costs are rising much faster than overall inflation. Post-employment liabilities outstrip governments’ financial resources. Reduced Social Security and Medicare benefits seem likely.

A recent survey shows that only 34 percent of public-sector workers participate in their employer sponsored defined contribution plan, compared to 70 percent of private-sector workers. In addition to low participation rates, public-sector participants tend to be more conservative and less active investors.

It’s easy to see why: Government employers have been victims of their own success. Traditional pension plans and retiree health-care benefits have encouraged long-term worker retention. That success is turning against governments and their employees. Giving the current trends, future retirees are probably going to find that things cost more then than they do now.

Public workers who recognize the problem find themselves having to financially prepare for their retirement needs but being not comfortable with investing. New research underwritten by Nationwide may offer a map for governmental employers who want to help their workers navigate through this unfamiliar territory.

In one sentence: Respondents said they’d value having access to help with investing and guarantees against investment risk.

Respondents said they found the managed account concept — where participants would agree to have a professional manager their retirement assets in exchange for a specified fee — is an easy “concept” to understand. About half also agreed that having a managed account feature would make investing simpler and more convenient, and would save time.

When asked whether their employer-sponsored plan should have an account guarantee, more than half agreed that it would provide them with a sense of financial security. Respondents expressed an increased likelihood to sign up for an account-guarantee feature if they could move plan assets into it. They also indicated that such a feature would motivate them to keep their assets in their employer-sponsored retirement plan.

Judging by how providers are enhancing defined contribution retirement plans, Nationwide’s research is probably not unique. But it suggests a path for human resources and benefits personnel to trod: Ask your provider about tools and features they may offer to increase participation and plan retention.

The Conference of Mayors deferred compensation program is provided by Nationwide Retirement Solutions. For more information, contact Kathryn Kretschmer-Weyland at 301-351-4350 or by e-mail kweyland@usmayors.org.