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Aon — Aon Hewitt — Retirement and Investment Webinar Series (December 2015)

23 slides from Aon's conference presentation, Dec 2, 2015

  1. Slide 1: Retirement and Investment Webinar Series

    Retirement and Investment Webinar Series December 2, 2015 Aon Hewitt Retirement and Investment

  2. Slide 2: Retirement at Age 65: Boom or Bust?

    Retirement at Age 65: Boom or Bust? • Rick Jones • Tomeka Hill • Alan Parikh • Usha Mirchandani Aon Hewitt Retirement and Investment

  3. Slide 3: Agenda

    Agenda  How is the current U.S. workforce evolving and what are the expectations over the next few decades?  How are current benefit offerings impacted and how can companies address this?  What does an evolving workforce mean for talent knowledge retention and transfer?  Questions Aon Hewitt Ret

  4. Slide 4: The Workforce Continues to Evolve

    The Workforce Continues to Evolve During the last decade, the 55+ workforce has grown significantly. Longer life expectancies and the Great Recession have strained retirement resources and delayed some retirements. People Are 55+ is Living Longer, Growing Retiring Later  30% Age 55-64 cohort saw 

  5. Slide 5: Key Drivers of Rising Retirement Ages

    Key Drivers of Rising Retirement Ages Retirement Demographic Structural Social Security income shifts shifts shortfalls  Full eligibility age  Decline in Defined  Some industries  Improved health rising to 67 by 2027, Benefit and retiree struggling to retain status from 65 in 2002 and medical co

  6. Slide 6: How Retirement Age Has Increased

    How Retirement Age Has Increased  Since 2005, the average age at which people retire has increased by about 1.4 years  Sharp rise in people waiting until age 65-69 to retire (20.6% in 2005 to 33.5% in 2013) Average Age at Retirement 66 Aon Hewitt believes 65.4 that retirement ages will 65 continue

  7. Slide 7: Age 55+ Workforce Share Will Soon Be 25%, Nearly Twice as Large as in 2000

    Age 55+ Workforce Share Will Soon Be 25%, Nearly Twice as Large as in 2000 Percent Distribution of the Labor Force, by Age, 1950-2020 100% 4% 3% 3% 3% 5% 5% 4% 7% 11% 9% 10% 65 and older 90% 12% 14% 14% 15% 18% 80% 16% 16% 22% 18% 21% 55 to 64 70% 21% 23% 20% 60% 19% 26% 45 to 54 22% 20% 26% 50% 23%

  8. Slide 8: The Retirement Wave Hits Some Harder Than Others

    The Retirement Wave Hits Some Harder Than Others Workforce Population by Age 18% All industries will be impacted by baby boomer 16% retirement wave. 14% The following industries will struggle the most to 12% refill talent pipelines:  Manufacturing  Insurance 10%  Utilities/Energy 8% 6% Banking/Fi

  9. Slide 9: Shifts in Retirement Plan Sponsorship

    Shifts in Retirement Plan Sponsorship Defined Contribution Only Cash Balance or Pension Equity Traditional Pension 100% 27% 32% 80% 15% 69% 60% 24% 78% 40% 58% 20% 44% 16% 13% 15% 9% 0% 2000 2005 2010 2015 Potential Impacts/ Solutions:  Longer working careers  Reduce leakage/ increase savings rate

  10. Slide 10: Traditional Retirement “Triggers” are Disappearing

    Traditional Retirement “Triggers” are Disappearing Defined Contribution Triggers Less Likely to Drive Behavior Than Defined Benefit Value of Retirement Benefit 65 – Normal Retirement 62 – Unreduced Defined Benefit Defined Contribution 70.5 – Required Minimum 55 – Early Distributions Retirement 59.5

  11. Slide 11: Total Defined Contribution Plan Savings Rates

    Total (Employer + Employee) Defined Contribution Plan Savings Rates 20.0% 100% 78% 78% 79%  7.6% average employee 76% 76% 80% savings rate has been 15.0% mostly flat since the 11.3% 11.3% 11.5% 11.5% 11.5% beginning of the 2008 60% recession 10.0%  Higher participation rates 3.8% 3.9% 4.0% 4.0% 3.

  12. Slide 12: Financing Retirement in a Low-Interest Rate Environment

    Financing Retirement in a Low-Interest Rate Environment Self-Insuring Retirement—25 Year Drawdown Example Falling interest rates have eroded the annual income from drawing down a $1M nest egg (invested in typical bond funds) over 25 years after retirement:  $80k at 1995 rates  $70k at 2005 rates 

  13. Slide 13: Retirement Rates

    Retirement Rates 70% Experience 2010-2014 60% Prior assumption (pre-2010) 50% Current assumption (since 2010) 40% Proposed- Initial 30% Proposed- Ultimate 20% 10% 0% 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 Observation  Assumed retirement rates exceed experienced rates; specifically in the late

  14. Slide 14: Why Retirement Age Assumptions Matter

    Why Retirement Age Assumptions Matter Typical Impact Greater Assumed Longevity Rising Assumed Retirement Ages Accounting  Higher pension expense  Lower pension expense  Higher balance sheet liability  Lower balance sheet liability Cash  No impact until IRS revises  Lower required contributions

  15. Slide 15: Economic Reasons Are Resulting in Extending Retirement Age

    Economic Reasons Are Resulting in Extending Retirement Age Staggered retirements are tapering the anticipated cliff… Total Number of Retirements 1,000 900 800 700 600 500 400 300 200 100 - 2010 2012 2014 2016 2018 2020 2022 2024 …but creating more talent management challenges Source: Aon Hewitt illu

  16. Slide 16: Meet the Modern Workplace

    Meet the Modern Workplace Baby Silents Gen X Millennials Boomers Born 1925-45 Born 1946-63 Born 1964-80 Born 1981-96 …Challenging Talent Strategy Aon Hewitt Retirement and Investment 16

  17. Slide 17: Need For a Segmented Talent Strategy

    Need For a Segmented Talent Strategy  Deepen analytics to understand/anticipate the patterns and impact – Cliffs – Retirement readiness – Succession pools  Design flexible work arrangements and schedules to meet evolving needs  Plan mentoring and knowledge transfer programs  Establish ‘Technical

  18. Slide 18: Actively Manage Preferences Around Collaboration, Competition and Connection

    Actively Manage Preferences Around Collaboration, Competition and Connection Within the Workforce Baby Millennials Boomers  Collaborate through face-to-  Collaborate through social face meetings media, share point, email  Expect tenure based growth  Expect rapid growth and  Accustomed to annual

  19. Slide 19: Understand the Expectation for Promotion

    Understand the Expectation for Promotion 89% 77% Millennials 68% Other Generations 53% 77% 2 years or less 5 years or less Source: Corporate Executive Board Design opportunities for Millenials to experience growth in responsibilities—partnering with senior ‘technical gurus,’ project management, lead

  20. Slide 20: Key Takeaways

    Key Takeaways Retirement cliffs are tapering Analytics can help with a planned response Need for a segmented talent strategy Understand needs of workforce segments and build nuanced programs to address needs 20 Aon Hewitt Retirement and Investment 20

  21. Slide 21: To Summarize

    To Summarize  How is the current U.S. workforce evolving and what are the expectations over the next few decades? – We expect the average retirement age to increase 1-2 years by 2030 as multiple forces will continue to encourage later retirements.  How are current benefit offerings impacted and ho

  22. Slide 22: Questions and Answers

    Questions and Answers Email [email protected] with questions for our speakers or use the webinar dashboard to submit questions during the live presentation. Aon Hewitt Retirement and Investment 22

  23. Slide 23: About Aon Hewitt

    About Aon Hewitt Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance an

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