- Retirement benefits currently are becoming a topic of larger concern as the “baby boomer generation” (BBG), the generation of employees born between the years of 1946 to 1964, nears some of the first years of retirement age of 65 starting in 2011 (Society for Human Resources Management, 2011). Traditional retirees have relied on Social Security retirement benefits (SSRB), and anyone who have elderly parents are acutely aware how much these benefits are relied on. As the BBG fully enters the retirement segment, United States SSRB will be used at an exponential rate. As SSRB are supported by current working populations’ contributions, the number of payees supports the SSRB pool. Since the BBG is a larger pool, the incremental SSRB pool will decrease as the BBG pool retires, placing a larger SSRB payee pool on the subsequent generation, known as “Generation X” generation born from 1968 to 1979 (GenX) (Gurchiek, 2008).
- Due to debt and the burgeoning retirement of BBGers, GenXers, (Gurchiek, 2008) are sandwiched in a difficult position relative to retirement. My own experience as a GenXer is consistent with Gurchiek’s (2008) observations that I may be unrealistically dependent on SSRB for my retirement future, but as I get older, I have been looking for employers that offer retirement benefits. I have worked for organizations that offered more training benefits and opportunities for advancement, while ignoring offers of 401 K participation offers. I needed every penny of my income to pay for debt and bills while my spouse was attending graduate school years ago. Also, as I became a little more prosperous, paying for accrued credits cards and student loans became a priority so that I could return to school to increase my future income. Thus, I incur more debt, which is consistent with the GenXer cycle. Also, I need to pay my debts to increase my credit score so that I could buy a car, lower my overall interest payments, and hopefully buy a house one day. My own debt as a GenXer and finances indirectly affect my retirement decisions, because if I can’t pay my bills the way I should, then prioritizing retirement contributions becomes a lesser priority. Organizations with strong retirement plans are difficult to find in the current economic picture, and this is why I chose to work for the University of California, which offers retirement benefit vesting after five years of employment.
- As I become more solvent, I do plan to contribute more of my income to defined contribution retirement plans (DCRP). My spouse contributes to a DCRP annuity, which has been great for our family. My spouse elects to contribute a small amount every month from her salary to an investment annuity. This plan is stable, and we can borrow money from the accrued fund whenever we foresee major expenses such as childcare, of anticipated car purchases. Overall, as a typical GenXer family, we prefer a DCRP, which has been very useful for us.
- For both my wife and I, based on our generational issues, economic climate issues, we have not worked for companies that offer any traditional pension plans. There are many reasons for pension disappearance. One major reason is that as companies continually look for ways to maintain their margins, pensions are easy targets for elimination, prior to the Pension Protection Act of 2006 (PPA). The PPA sets standards for, allows organizations to automatically enroll employees in DCRPs (Miller, 2006). Earned pensions are still protected by Pension Benefit Guaranty Corporation (PBGC) (Society for Human Resource Management, 2010), but from any observation, the Direct Benefit (DB) Plan may be used incrementally less in the future.
- As we examine these generational shifts and shift from Direct Contribution Benefits Plans to DCRPs, employees, or individuals may not even be able to choose a DBs as a retirement option. Employees that already have DBs will want to keep them. Depending on the proximity to retirement, employees will choose to amplify their participation in DCRP’s accordingly. GenXers may be more concerned with paying their bills than with retirement, but as their children age and careers mature, GenXers will contribute more of their earnings to DCRPs. Employees in their mature career status will be motivated to amplify their contribution and take more of an active role in DCRPs to supplement their personal investments, DB (if they still have one) and SSRB. High performing professionals in their late career stages may be taking more risks to increase DCRPs, depending on the third party performance and stock market volatility.
- As organizational tweaking of DCRPs evolves, as noted by experts (Society for Human Resources Management, 2010), organizational responsibility will start with offering benefits as recruitment and retaining mechanisms (Smith & Mazin, 2004). Organizations will exercise fiduciary and administration responsibility through the process, as well as informing and educating employees regarding the benefits provided (Smith & Mazin, 2004). Employees will need to be responsible for being active in their own retirement management. While organizations are responsible for the administration, process, and information, this is supportive in nature, but does not remove responsibility from the employee. For organizations with unionized workforces, unions take an active role in keeping an eye on retirement benefits changes, but the unionized employee still needs to take an active role in their individual retirement plan. Any employee participation will depends on the view that the employee takes depending on their career maturity and income levels (Weatherington, 2008), and makes converse decision making matrixes on generational parties involved, in the case of the discussion of BBG and GenX.
- The current workforce is dynamically changing from one generation from the next, while at the same time issues such as life expectancy, possibly longer working careers for both BBG and GenX. Organizations will utilize more of a cash balance (CB), since it mirrors employee participation, lowers administration processes, enables movement, and creates more goodwill (SHRM, 2010). Organizations may also elect to encourage more individual savings plans (SHRM, 2010), as this places more responsibility on the employee. The preferred type of plan used by the organization would depend on its size and nature, e. g. public vs. private, unionized, or non-unionized. Any plan that the organization uses will be configured according to budget constraints, recruitment and retaining goals of the organization. As an HR professional, we also need to keep the business needs of the organization in mind, as organizations might look to trimming benefits and compensation to avoid cutting the number of its staff (Atkinson, 2009). Going forward, until the United States economy realizes real recovery and GDP growth, managing and mitigating benefits concerns can determine the survivability of an organization.
- Discussion of retirement benefits is not only important for learning to be a “Critical Activist” but also as an individual. For myself as a working student, this research-analysis is eye opening to the challenges that I see from a personal level, while at the same time connecting to the contemporary larger global issue of retirement. When I as an individual can learn to manage for my retirement, I believe that I can be a better HR servant to constituent employees.
References
Atkinson, W. (2009). Filling in around the edges. HRMagazine, 54(11), 55–58.
Gurchiek, K. (2008) Gen X and Finances: Survey Finds Six Distinct Money Attitudes. Society For Human Resource Management. Retrieved from
http://www.shrm.org/Publications/HRNews/Pages/GenXandFinances.aspx
Miller, S. (2006) Pension Protection Act: Overview of DC Plan. Provisions likely to spur 401(k) plan redesigns, cash balance conversions. Society for Human Resource Management. Retrieved from http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/CMS_017984.aspx
Smith, S., & Mazin, R. (2004). Benefits: What makes a benefits package competitive? In The HR answer book (pp. 117–142). New York NY: American Management Association International.
Society for Human Resource Management (SHRM). (2010) Introduction to the human resources discipline of employee benefits. Retrieved from http://www.shrm.org/hrdisciplines/benefits/Pages/benefitsintro.aspx
Society for Human Resource Management (SHRM) (2011) Despite Recovery, Boomers See Delayed Retirement Many plan to work at least four extra years. Retrieved from http://www.shrm.org/hrdisciplines/benefits/Articles/Pages /BoomersDelayRetire.aspx
Weatherington, B. L. (2008). Income level and the value of non-wage employee benefits. Employee Responsibilities and Rights Journal, 20(4). 291–300.
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