Engaging Participants

Navigating the Next Stage: Start the Transition Conversation With Pre-Retirees Now

Navigating the Next Stage: Start the Transition Conversation With Pre-Retirees Now

With the youngest Baby Boomers in their 50s, plan sponsors are increasing their focus and actions related to an aging workforce. According to Aon Hewitt’s 2016 Hot Topics in Retirement and Financial Well-Being survey, 70% of employers surveyed believe their workforce will experience an increase in the retirement-eligible population over the next three years. 

With the rise of financial wellness programs, more plan sponsors are expanding their financial wellness services, tools and engagement
and education campaigns in an effort to
build confidence and reduce stress among participants as they make the transition to and through retirement.1

  • 56% of employers indicated they are very likely to focus on the financial well-being
of employees in ways that extend beyond retirement decisions, placing it in the top spot of employer initiatives in 2016.
  • One in five of these employers increased the level of automation, self-service and/or Web access to their retirement plans so workers can more easily start their retirement process.

Making the shift to taking income in retirement can be a complex proposition, both emotionally and financially. Saving money is half the battle; figuring out how to generate a steady paycheck throughout retirement can be just as daunting. Many employees procrastinate until the final few years prior to retirement to create a plan or make significant decisions.

In a time of increasing longevity and rising healthcare costs, starting the conversation earlier with pre-retirees (beginning at age 50+) via segmented communication plans that leverage multiple touchpoints is critical.


Plan sponsors should look to their retirement plan partners and advisors/consultants to review the plan’s demographics and create an appropriate retirement transition and education plan. Many offer comprehensive transition programs that include educational workshops and on-demand webinars, robust planning tools and calculators and guidance via call centers, 1:1 consultations and online/mobile platforms. 


Today’s workers are expecting to work longer and retire at an older age.Delaying retirement creates potentially higher plan costs, leaving plan sponsors to look for ways to adapt to an aging workforce, including accommodating longer working lives, creating job opportunities for older workers and enabling them to transition into retirement by shifting from full-time to part-time. In addition to better-managed employment costs and succession planning, it can encourage increased productivity by employees who are less worried about their finances.

For employees, the anxiety of moving to a new life stage can be stressful and overwhelming. They are not only worried about future retirement income/expenses, but they are also concerned about significant life changes that may last
up to 30 years. Helping pre-retirees develop a plan to pay themselves in retirement (including calculating expenses, identifying investments that generate income and determining which tax-advantaged assets to draw down first) can help reduce the anxiety. In addition, helping them envision what their future part-or full-time retirement lifestyle will look like is just as critical.


According to the Aon survey, employers are planning to increase their communication efforts to workers regarding the retirement process. By the end of 2016, it is likely that 89% of employers will have taken some step to reach out to near-retirees about the necessary steps in the retirement process.

Plan sponsors can play a crucial role in helping improve their employees’ retirement outlook through three key opportunities:

Opportunity 1
Offer pre-retirees enhanced levels of assistance in planning their transition into retirement, including education about distribution options, retirement income strategies, required minimum distribution (RMD) calculations, risks in retirement, access to financial counseling and the need for a backup plan if forced into retirement sooner than expected (e.g., health issues, job loss, family obligations).

Identify pre-retirees who are not on track in-plan to retire on time. Create a targeted campaign to remind them of age 50+ catch-up contributions and the impact of increasing their deferral rate, while also highlighting income-planning tools and resources.

Help pre-retirees understand how five key risks in retirement (replacement income
 risk, longevity risk, sequence-of-returns risk, withdrawal rate risk and cognitive risk) could impact their income stream and what they can do to offset these potential obstacles.

Consider adding a managed account option to the plan to address the needs of pre-retirees. Participants who benefit most from opting
in to a managed account service tend to be middle-aged, nearing retirement, and have an increasingly complex financial picture, including outside assets.4

Opportunity 2
Provide education about Medicare and Social Security claiming strategies to help employees determine the impact Social Security will have on their monthly income, including what age they should begin collecting payments, and how to make informed decisions about when and how to apply to maximize the value of their benefits.

Opportunity 3
Offer access to retirement-oriented lifestyle and transition planning resources to help pre-retirees envision their life in retirement and find purposeful ways of spending their time, including encore careers, earning supplemental income and giving back to their communities.


While income-planning tools are just one aspect of the retirement transition discussion, when designed well, they can be an important way to help pre-retirees identify income gaps, increase savings via increased deferral rates and provide an interactive way to track their progress.

A 2015 Empower Institute survey found that just 28% of respondents have access to income- planning tools that show how changes to their savings rate affect their outcome; of those, only 15% actually use these tools for those purposes.5 Interestingly, when looking at why they are not used, the top three reasons speak to simplicity and accessibility in some form or fashion: both on the Web and in a mobile environment.

Built correctly — and intuitively — retirement income-planning tools that include social security estimations tailored to each individual, and based on demographic data and individual inputs, can add value. For plan sponsors reviewing their current income-planning tool, or looking to incorporate one into the plan, consider the following:

  • They should be intuitively designed with simple, interactive components that make it easy for people to model different scenarios.
  • They should include pre-populated data relative to each individual using the tool whenever and wherever possible.
  • They should be in the forefront of the individual’s experience, being easily accessible both in the Web and mobile environments. 


As the industry evolves, and more individuals approach retirement, plan sponsors are turning their attention to ways participants can convert their savings plan balances into lifetime income within the plan (see Top 5 In-Plan Retirement Income Options chart at left).

Prior to beginning the conversion of retirement savings to income, pre-retirees need to understand and determine complex topics, including:

  • When to start withdrawing assets (their retirement “date”);
  • Which in-plan strategy offered by the plan is best for their assets, financial picture and needs;
  • Which withdrawal strategy (fixed percentage, fixed dollar, investment earnings or a “bucket” withdrawal strategy) would be best for them when considering the pros/cons of each;
  • Which assets to draw from first for tax- advantaged planning;
  • Optimal asset allocation that matches income needs, risk tolerance and ability to weather inevitable market declines.

To help with this pivotal but potentially confusing conversation, plan sponsors should consider adding a professionally managed account offering and/or an in-plan financial wellness program. Each of these options offers access to holistic financial planning guidance and 1:1 consultation with financial professionals to help put a personalized plan in place toward transition, although their approach is different.

  • Financial wellness programs help to provide the nudge many pre-retirees need by leveraging financial behavior research, targeted demographic communications and digital approaches.
  • Managed account service providers create customized portfolios for plan participants
for an additional fee. They are usually based
 on the stand-alone funds already available in the plan’s investment menu and savings data gleaned from a plan’s recordkeeper or direct input from participants. Services can include: specific investment portfolio recommendations, a savings rate recommendation, ongoing professional portfolio management and rebalancing and an estimated retirement income for each participant.

Lastly, re-evaluate the plan’s current communications strategies and consider segmented strategies based on age and comfort level with technology. For example, investors aged 55 to 64 are most likely to use laptop computers (69%) to access financial account information versus other devices: tablet (39%) and smartphone (42%).6 

1Aon Hewitt, 2016 Hot Topics in Retirement and Financial Well-Being
2The Transamerica Center for Retirement Studies, “The Current State of Retirement: Pre-Retiree Expectations and Retiree Realities,” December 2015.
3Aon Hewitt, 2016 Hot Topics in Retirement and Financial Well-Being.
4Cerulli, “Retirement Markets 2015: Growth Opportunities in Maturing Markets,” 2015. 
5Empower Institute, “Lifetime Income Score V: Optimism and Opportunity,” March 2015.
6The Wall Street Journal, Devices and Dollars, September 2016.


BNY Mellon Retirement personnel act as licensed representatives of MBSC Securities Corporation (a registered broker-dealer) to offer securities, and act as officers of The Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds as well as to offer separate accounts managed by BNY Mellon Investment Management firms. BNY Mellon Investment Management encompasses BNY Mellon’s affiliated investment firms, wealth management services and global distribution companies, including MBSC Securities Corporation and The Bank of New York Mellon. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation.

The material contained is for general information and reference purposes only and is not intended to provide or be construed as legal, tax, accounting, investment, financial or other professional advice on any matter, and is not to be used as such.

The article appeared in the Winter 2016 issue of Planet DC magazine.