A smaller paycheck today, a retirement plan tomorrow

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If you currently have a retirement benefit — or if you had one at your last company — it is probably in the form of a 401(k). The simplest way to explain a 401(k) is that you contribute to a savings account right now without paying interest on it, and if your employer is nice they also contribute, perhaps matching your input. These contributions often come in the form of stock investments, depending on the company’s plan. That’s why, in the wake of economic crises, like the one that went into full throttle at the tail end of 2008, many people lose a significant amount of their retirement fund. The chain reaction that began with a plummeting stock market resulted in would-be retirees staying at their jobs because they could no longer afford to leave the workforce.

Another retirement option that was once extremely popular but faded in the last few decades is a pension. In this setup, workers and their employers have a specific contribution rate set for a pension that determines how much money each employee will receive upon retirement. Unlike a 401(k) plan that can lose or gain value depending on the market, a pension is typically guaranteed to pay out at a predetermined value once you retire. There are also other variations of each of these retirement plans that you might have encountered in your career.)

Today, employers are hiring again (yay!) and job seekers are looking for a job that suits them, both in terms of qualifications and in perks. And, according to a three-part Towers Watson Retirement Attitudes survey, retirement in either form is playing a bigger role in the job search process. According to the survey, 30 percent of workers would prefer to receive lower salaries today with the promise of higher retirement funds in the future. Similarly, 42 percent of workers would choose a small bonus opportunity right now in exchange for higher benefits for retirement.

Employers are factoring all these issues into their decision to accept a job with a certain organization. From the survey:

  • “One-fourth of employees cite their company’s retirement program as an important factor in their decision to work for their current employer; 41 percent cite it as an important factor in their decision to stay with their employer.”
  • “One-third of employees at companies that sponsor a defined benefit (DB) [pension] plan cite the retirement program as an important reason they decided to work for their current employer, compared to only one-fifth (21 percent) of those at organizations that sponsor a define contribution (DC) [401(k)] plan.”
  • “60 percent of recent hires at companies that sponsor a DB plan say that their company’s retirement program is an important reason they chose to work for their current employer (up from 27 percent in 2009); 72 percent say it is an important  reason they will stay with their current employer (up from 51 percent in 2009).”

Health care costs don’t disappear with retirement. In fact, health issues often rise with workers of retirement age. Therefore, it’s not surprising that the cost of health care is a chief concern for workers, especially those presently in poor health. Today, 45 percent of workers in poor health plan to delay their retirement, which is a 9 percent increase from 2009. In addition, 68 percent of older workers list health care benefits as a primary reason to put off retirement.

You can read all three parts of the retirement survey at the Tower Watson site. It’s an interesting look at the mentality of workers and shows a shift in worker attitudes over the past few years. And, if you’ll recall, a few months ago, we asked if savings accounts were things of the past. For many workers, rainy day funds are taking a backseat to immediate needs.

Both surveys reflect the new reality of Great Recession workers: plan for tomorrow while surviving today. Many workers abruptly learned that a job and its benefits can quickly disappear, and they don’t want to face that kind of shock again. The promise of some security down the road is comforting, even if it means having to live less luxuriously right now. But some things, such as paying the mortgage and grocery bills, can’t wait.

As you search for a job, are you looking at retirement benefits when choosing employers or negotiating salary? Are you willing to accept a lower paycheck for a good retirement plan? Let us know how retirement is playing a role in your search or has played a role in the past.

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