Employers Should Make Pre-Retirement Counseling More Meaningful
By Norse N. Blazzard and Judith A. Hasenauer
For some time now, many larger employers have been providing employees with financial counseling before they retire.
We have observed much of this pre-retirement counseling and have concluded that it is often perfunctory at best–merely a half-hearted attempt to satisfy perceived requirements with little meaningful information being imparted. Yet, with current economic conditions and increasing longevity across the board for all workers, the need for workers to obtain significant information in order to plan their retirements is essential.
Most of the counseling sessions we have observed tend to focus on elementary investment strategies such as asset allocation, diversification and the like. These sessions usually do not include any information about the tax consequences of the various methods of taking pension distributions and, worse, nothing about longevity planning.
Few, if any, workers seem to recognize that taking an IRA distribution for “life expectancy” does not guarantee a worker against outliving the funds available for retirement.
Indeed, actuarial tables indicate that more than half of all retirees will outlive the life expectancy tables promulgated by the Internal Revenue Service. This means that most of those who have tied up all of their retirement funds in only life expectancy distributions are bound to run out of money before they run out themselves.
After sitting in on hundreds of these pathetic pre-retirement counseling sessions, we have asked employers why they do not have more substantive material presented. Why do they not permit financial professionals to participate? And why do they not sponsor products that will protect employees from the risks the employees will encounter in retirement?
They universally answer that they do not want the liability that attaches to sponsoring products and providing meaningful advice.
They tell us they believe that if something goes wrong with a sponsored product or proffered strategy, our friendly plaintiffs lawyers will try to hold them responsible.
While this may merely be more “lawyer-bashing,” it nevertheless results in retiring employees being deprived of essential information and products that can safeguard the remaining years of their lives.
We understand that there is a move afoot in Washington to free employers from any liability that would result from the provision of more meaningful information prior to retirement. This is a positive development, and we only hope that the end result enables financial professionals to participate in the offering of sponsored products to retirees.