There are a lot of factors that people take into consideration when looking for a new employer. Younger workers are more concerned about sustainability than many of their older counterparts.
Countless millennials and Generation X employees have said that they would rather work at a company that is committed to eco-friendly business practices. One poll found that 40% of millennial employees have chosen a company for being eco-friendly and over a quarter of Generation X employees have said the same thing.
However, employees have their limits on the sacrifices that they would make to take a job at an eco-friendly employer. Around half of all workers said that they would be willing to take a pay cut to work at a company with sustainable objectives, but only 10% said that they would be willing to take cut of $5,000-$10,000.
Employees might be even less likely to take significant pay cuts if they also had to lose important benefits to work for an eco-friendly company. Retirement benefits, healthcare and other amenities are very important.
This means that eco-friendly businesses still need to incentivize employees by offering great retirement services. They need to be marketed especially hard to Generation X employees, since they are closer to retirement.
What Eco-Friendly Business Owners Have to Consider When it Comes to Annuities
Virtually every story you hear about annuities includes a reminder that annuities are for those who have already retired or nearing retirement. This is true for several annuity products, but this creates an issue since companies are offering no retirement benefits or limited resources for people who are preparing for retirement. Annuities could help to fill this void for employees, especially workers who are part of Generation X.
This is something that eco-friendly businesses need to take to heart. They must think about the retirement options that they can offer their employees, because their passion for environmental sustainability will only go so far.
Generation X describes people who are in their 30s and 40s. While these individuals are likely not ready to retire, they are likely thinking about how to prepare for retirement and may have a plan in action. Unfortunately, retirement options are looking pretty bleak Generation Xers.
Employees are Running Out of Options
The grandparents of people in Generation X, and some of their parents, were able to redeem their pensions at retirement. However, pensions are almost a thing of the past. Pension plans were sponsored as recently as 1998, when 90 of the Fortune 100 companies offers some form of a pension. In 2012, only 30 of these companies provided pension plans, according to a Towers Watson analysis which stated that most companies offer a hybrid retirement product.
The Bureau of Labor Statistics asserts that only 9% of private companies have pensions for their employees. It is unclear how that figure stands for eco-friendly businesses, but it is likely lower. This is something sustainable businesses must address.
IRAs and 401Ks
Eco-friendly businesses should also consider offering traditional retirement packages. Gen Xers can consider individual retirement accounts (IRAs) and/or 401Ks, but both of these plans come with limits. Individuals who are younger than 50 can only contribute $5,500 a year to an IRA; the yearly limit for a 401K is $17,500 provided the company provides a 401K option. Most large corporations offer 401K as part of a standard package, but a SurePayroll survey revealed that 70% of small businesses don’t have a 401K in place for employees.
Employees who are part of Generation X can also think about Social Security when it comes to setting up their finances for retirement. However, the Social Security Administration (SSA) has stated that unless Congress acts quickly, the administration won’t have the funds to provide significant funds for people who are retiring in 2033 and beyond. This is around two years after many Gen X individuals are eligible to retire.
However, eco-friendly businesses must be cautious about relying too much on Social Security for their employees. It is important to make sure that they weigh the benefits of other options.
So, where else can Generation X go to save money for retirement and still receive tax benefits?
Annuities Could Be the Solution
Annuities could be a retirement option for Gen Xers if individuals from this generation can come up with an annuity that will eventually turn into a self-funded pension.
People who belong to Generation X are at a time in their lives when they are managing their budget in an attempt to take care of major bills such as car payments, raising children, and mortgages. This means that many Gen Xers are not prioritizing retirement. But focusing on the tax benefits and growth potential of an annuity could convince Gen Xers to turn to annuities for their retirement needs as it pertains to finances.
There are several options to explore when it comes to annuities. Right now, interest rates are extremely low, so it won’t make much sense to pursue a fixed annuity. As a matter of fact, it may be a while before fixed annuities are a good idea financially.
Deferred annuities, on the other hand, could be a smart choice. These annuities begin with a small deposit and allows you to make a contribution each month, quarter, or year. This is similar to the way that a 401K works. Gen Xers can select a combination of mutual funds and stocks based on the risk. Variable annuities can also include riders that guarantee a stream of income during retirement.
It is important to note that the real benefit of deferred annuities is evident during tax season. If Gen Xers are managing an account themselves, they would owe taxes on the profits at the close of the year. However, when the funds are in an annuity, the investment will increase without tax penalties until the annuity holder is ready to withdraw the funds. Once the annuity holder starts taking out money at retirement, the tax rate will likely be lower; there is a 10% penalty for people who withdraw funds before they are 59 1/2 years of age.
Annuities Can Be Appealing Retirement Plans for Eco-Friendly Businesses
Eco-friendly businesses must make sure that they offer the best retirement plans to their employees. Annuities will likely be appealing to Generation X employees at eco-friendly businesses in other situations, such as inheriting money or receiving a lump sum of cash when selling a company. Individuals can also self-fund an alternative to life insurance through their annuities. Like all investments, annuities will become more beneficial over time. This means that a person in their 30s or 40s can purchase an annuity now and start adding to the account so that it can be used as regular income during retirement.
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