Americans may be facing a retirement crisis. A combination of low savings and high healthcare costs could cause problems for many of today’s workers as they reach retirement age. Companies that offer solid retirement health benefits could make themselves very attractive to workers.
The need for retirement benefits is greater than ever.
Approximately 10,000 Americans turn 65 every day. However, not all these individuals are financially ready to retire. According to the 2019 Planning & Progress Survey from Northwestern Mutual, 15 percent of Americans have no retirement savings, and 22 percent have less than $5,000 saved.
At the same time, healthcare costs are soaring. CNBC reports that estimates from HealthView Services, which provides healthcare cost projection services, warn that the average 65-year-old couple will spend $387,664 on healthcare costs during retirement. This estimate assumes the couple is in good health at retirement. It includes Medicare costs, but it does not include long-term care costs, which could add a substantial amount.
The majority of employers don’t offer retiree health benefits.
According to KFF’s 2019 Employer Health Benefit Survey, only 28 percent of large firms that offer employee health benefits also offer retiree health benefits. It should be noted that this looks like a big increase from the 2018 survey, which showed that only 18 percent of employers offered retiree benefits. However, KFF believes this is a due to a change in the way the question was asked and not a change in actual benefit offerings. Most likely, the percentage has remained fairly steady in recent years.
Nevertheless, this is still quite low, with just over one in four large employers providing retiree benefits.
Some companies are more likely than others to offer retiree benefits. Public employers are also more likely to offer benefits, with 65 percent of public employers offering benefits compared to only 13 percent of private for-profit firms. Other factors include the size of the employer, the percentage of older employees, whether any employees belong to a union, the percentage of highly compensated employees and the industry.
The details also vary considerably. Among employers offering retiree benefits, 55 percent do so for both early retirees and Medicare-aged retirees, and 89 percent offer benefits to spouses. Among employers offering benefits to Medicare-aged retirees, 44 percent contract with a Medicare Advantage plan.
The opportunity is there.
The unemployment rate is low, and employers are competing for a limited pool of skilled labor. Offering retiree health benefits is a smart way for employers to stand out in the tight labor market.
Travisoft’s retiree billing automation takes the hassle out of administering retiree health benefits. Learn more.