In the coming decade, the labor market will undergo a dramatic reorganization. The Bureau of Labor Statistics estimates that 11.3 million workers age 55 and older will enter the workforce by 2014, more than four times the typical market growth rate. At the same time, the bulk of Generation Y, numbering nearly 80 million, will enter the workforce as well.

Within that same time period, many of the 77 million baby boomers, more than a quarter of the U.S. population, will retire or plan to do so in the near future.

"Individuals are now preparing for retirement at an earlier age," says Bill McDermott, executive vice president of AXA Equitable Life Insurance Company. "With defined benefit plans becoming rare, the uncertainty about the future of Social Security and the increasing life expectancies accompanied by rising medical costs, people at all stages of the retirement planning process are concerned about their long-term financial security."

Employers and service providers agree that a strong emphasis on retirement education and planning needs to stay a top priority in 2008. But the message isn't about restating the same scary facts to employees over and over again.

"Repeating facts and figures is the equivalent of talking louder to someone who's deaf or doesn't speak English," says Steve Vernon, a former Watson Wyatt actuary whose company, Rest of Life Communications, specializes in retirement education.

Education a top priority

Vernon suggests employers get "smart" with their retirement messaging. Employers who want to help employees save should consider changing the way they present news about retirement to employees, so taking a more marketing/advertising approach to the subject can be key, he says.

"The knowledge is out there, but we're not getting it out there in a way that's compelling for people to change their lives."

With many employees working into their 60s or even 70s, employers need to do more than ever to ensure their working population stays healthy. Healthy individuals are more likely to maintain robust retirement savings, Vernon suggests, because they can eliminate costly medical bills from chronic conditions that often start to appear near retirement.

"Show, don't tell," he adds. Make sure senior management and executives demonstrate both healthy habits and also encourage saving by doing it themselves.

Employers have a responsibility'

Recent data from the Employee Benefit Research Institute suggests that there are 75 million Americans working for employers that do not offer a retirement plan.

Sixty-two percent of employers expect that at least half of their workforce will not have enough income to retire between the ages of 62 and 65, Aon reports in its 2007 Benefits and Talent Survey.

Employers have a responsibility to their employees to help ease the transition from employment to retirement, says McDermott. If they don't, "individuals [will look back and say] someone did me wrong,'" he adds. "HR leaders want to do the right thing. We see this as a natural part of being involved in your employee population." AXA recently launched Corporate Markets, a product geared towards offering retirement planning services to Fortune 1000 companies.

Younger workers are entering a workforce with dramatically different retirement policies than the previous generation and will need careful guidance on suggesting the best plan design.

Early planning critical

Auto-enrollment has proven popular for many companies. A survey released by Hewitt in 2007 suggests that 36% of plan sponsors have adopted auto-enrollment, up from 24% in 2006. Fifty-five percent of the remaining employers said they are somewhat to very likely to offer the service to new hires soon.

Employees must be proactive in managing their 401(k) plans and understand the investments offered in order to maximize the value of the plan, according to Aon Consulting Worldwide, which recently released a list of tips on retirement readiness.

"Unlike traditional pension plans, we are individually responsible for controlling our 401(k) plan contributions and investments," says Susan Alford, executive vice president with Aon Consulting. "That is why it is of the utmost important to review your 401(k) plan on a regular basis, so your can make the necessary changes to be ready to retire on time and with the sufficient amount of income."

Aon offers the following recommendations for employees:

• Be informed and disciplined. Create a spreadsheet that contains the list of assets, where they are held, the number of units or shares, and the value as of Jan. 1, 2008. Update it quarterly.
• Increase contributions. Set aside an additional 1% of pay each month. If this proves manageable, then you know you can increase you contribution by 1% without affecting your lifestyle.
• Understand plan fees. Administrative fees can lower the amount available for retirement. Pay attention to fees and the increasing amount of information that is being made available.
• Understand investments. Know the maximum deferral amount allowed and what percentage of deferrals are matched.
• Diversify. A diversified portfolio has characteristics of fixed income, stable value and equity. Consider target-date asset allocation funds or lifecycle funds if available. (See "Adding color to retirement nest egg" for expanded EBN coverage on teaching employees to diversify retirement investments.)