Union members are optimistic about their retirement outlook: 68% believe they will be ready for retirement financially

Taft-Hartley defined contribution (DC) plans play an important role in preparing union members for retirement, but there is little research on or coverage of the topic.  

“Sometimes our members don’t consider retirement and live life in the moment. That’s why we have both plans (DB and DC). However, a member’s DB plan alone won’t necessarily be enough to live on. I’m happy that a lot of younger workers are realizing that because they don’t want to be working construction jobs at age 75 to make ends meet.” – Rick Johnson, International Vice President, International Association of Heat & Frost Insulators and Allied Workers

About the study

This first-of-its-kind study aims to offer a unique look at the financial well-being of union members — and how Taft-Hartley DC plans are contributing to their retirement readiness. Three unique data sources provide a comprehensive quantitative and qualitative perspective.

1. Empower’s Taft-Hartley DC recordkeeping services: Analysis of more than 250 plans, 900,000-plus participants, and over $75 billion in assets under administration as of June 30, 2023
2. Survey capturing key retirement and financial well-being sentiment: A union member survey that captures how workers are doing in this challenging economic environment
3. Research interviews with trustees and representatives: In-depth interviews with representatives of unions and related associations

Overview of Taft-Hartley DC plans

Who can contribute? Most plans offer employer contributions, but only 46% allow member contributions.

Are most participants contributing? 49% of participants (in plans allowing contributions) contributed from November 1, 2022, through June 30, 2023.

How do participants break out by generation? 67% of participants are Gen Xers or older.

What is the average account balance? $83,087. Approximately 10% of union members have balances greater than $250,000, and almost 5,000 members in our study have over $1 million.

What investment strategies are used? Participants are primarily split between a do-it-yourself (53%) and a target-date-fund (46%) approach, but access to managed accounts is increasing, and one-in-five plans now offers these advisory services.

Key retirement readiness trends

“Hourly wages have been lagging inflation growth the past couple of years, and working people are being asked to do more for less.” – Brandon Rees, Deputy Director, Office of Investment American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

Financial well-being: More than two-thirds of union members agree they can afford their day-to-day needs, manage their debt, afford to save for the future, have a solid plan, and feel financially secure.

Union members strongly or somewhat agree

Empower survey of union members conducted August 14-17, 2023.

Top three financial goals: Union members report retirement savings, paying off debt, and building an emergency savings fund as their top goals.

Retirement plan loan concerns: As a result of the current economic environment, almost half (47%) of union members say they have or plan to take out a loan or hardship withdrawal from their retirement savings accounts.

Five ways to help improve retirement outcomes

1. Communicate the vital role that DC savings plans play in meeting members’ retirement income needs.
2. Allow for participant contributions, if they are not currently allowed, and encourage participants to save in their DC plans.
3. Expand access to and awareness of advisory services to participants.
4. Reduce “leaked” assets by establishing appropriate loan guardrails and help educate participants on the drawbacks of taking out loans and hardship withdrawals.
5. Focus on boosting engagement by helping capture participant emails and exploring innovative engagement strategies.

Click here to download the full study.

Empower refers to the products and services offered by Empower Annuity Insurance Company of America and its subsidiaries. This material is for informational purposes only and is not intended to provide investment, legal, or tax recommendations or advice.

Online advice and the managed account service are part of the Empower Advisory Services suite of services offered by Empower Advisory Group, LLC, a registered investment adviser. Past performance is not indicative of future returns. You may lose money.

The research, views, and opinions contained in these materials are intended to be educational, may not be suitable for all investors, and are not tax, legal, accounting, or investment advice.

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