State and local governments have seen an uptick in retirement rates among baby boomers and other older people who make up a large segment of their workforce, and this development could have major implications as policymakers consider changes to benefit programs for public workers.
Governments will increasingly need to rely on younger workers, whose priorities and concerns may be different from those in previous generations. Understanding and factoring in their needs and preferences can help states and municipalities build and maintain the skilled workforce they need.
Knowing what attracts and keeps talent—especially the younger age cohort—is particularly important because so many public sector retirement systems have modified benefits in recent years in response to funding challenges. Since these reforms primarily affect new workers, the changes can have a pronounced effect on those who have only recently entered the public sector.
To examine these issues, The Pew Charitable Trusts commissioned a national survey and a series of focus groups with younger workers. The survey of state and local workers under age 40 found that the group’s top priorities for retirement plans include flexibility to take accrued savings when changing jobs and access to lifetime income. Most feel they are likely to get promised benefits, with 79 percent saying they were “very” or “somewhat” confident they would receive all of the retirement benefits expected from their state or local government employer.
Sixty percent of those under 30 planned to change jobs and work for a different employer before retirement, significantly more than those just slightly older. Among those ages 30-39, that share was just 26 percent.
The survey also provides insight into younger public workers’ thinking about their retirement benefits. For example, this mostly millennial group had limited knowledge about specific retirement plans. Many reported low savings levels and said they carried some kind of nonmortgage debt, such as student loans or credit card balances. Sixty percent of those under 30 planned to change jobs and work for a different employer before retirement, significantly more than those just slightly older. Among those ages 30-39, that share was just 26 percent.
These younger workers were most likely to say that job security and work-life balance were the strongest factors in deciding to work for their current employer. The focus groups produced similar results, with participants’ priorities centered on benefits that improved life in the present rather than sometime in the future. While important, retirement and retirement planning were often perceived as being too far off to be a major factor in deciding whether to work for or leave an employer. However, many workers in their 30s said pension benefits had become more important to them over time.
Despite limited knowledge about retirement benefits, many focus group participants said they want to learn more about their employer-sponsored plans. Many spoke of trouble understanding the complex information provided and difficulties deciphering plan documents and handouts. In fact, about one-fifth of survey respondents did not know what type of retirement plan their employer offered, and less than half said they understood their plan well enough to estimate how much they would receive at retirement.
The survey results and focus group findings show that while retirement benefits are just one factor in recruiting and retaining younger public workers, they can play an important role. Employers and plan sponsors may want to consider ways to help workers better understand their benefits and make informed decisions about retirement planning. State and local policymakers should keep these findings in mind as they look for ways to strengthen and maintain their workforce.
Greg Mennis directs The Pew Charitable Trusts’ public sector retirement systems project, and Jonathan Jackson is a research associate with the project.