Retirement Planning: Whose problem is it?
The story has been the same for years: we are woefully unprepared for retirement. According to Northwestern Mutual’s 2018 Planning & Progress Study, nearly 1 in 3 Americans have next to nothing saved for retirement. In America, retirement planning is essentially a private endeavor. But, it’s also a critical component of employer compensation and benefits spending, and overall workforce planning.
3 Ways for Employers to Improve Retirement Outcomes
Employee stress over finances, both current and future, has multiple direct impacts on employers. Reduced productivity and postponed retirement increase employer health and compensation costs and limit employers’ ability to effectively manage their workforce. As an employer, what does this mean for you and what are you to do?
There are both expensive and inexpensive ways to help with retirement readiness. The more you’re able to do, the better, but even doing just a few things can help put your employees on the right path.
1. Prioritize Retirement Readiness
Most of your employees are desperately in need of financial wellness support, and specifically retirement planning assistance. A Charles Schwab nationwide survey of 1,000 workers with access to a 401(k) plan revealed over 75% of respondents would welcome a financial wellness program from their employer, which could provide education, tools and resources to help with their overall financial health.
Fundamentally, planning for retirement is a numbers game. Understanding how much you want to live on per year when you retire is a first step. Whether it’s $70,000, $140,000, or $280,000 a year, you’ll need to have at least 10 to 12 times this figure in savings by retirement. Help your employees understand where they need to be, monitor their progress and improve their numbers.
2. Perform an Annual Post-mortem
When was the last time you evaluated the effectiveness of your financial wellbeing communication strategy? A 2017 Willis Towers Watson Defined Contribution Plan Sponsor Survey indicates that 88% of sponsors use plan statistics to assess retirement readiness, such as average participation rate, account balance and contribution rate. Yet only one-third of plan sponsors annually measure when participants will have enough money to retire.
This highlights an important gap. We can’t be sure employees are pulling the right levers when we don’t know what goal they are working toward. Before you lay out your financial wellbeing communication strategy for the year, use real-time data to determine your objectives and drive your decisions. By the end of the year, where do you expect to move the needle? Do you want employees to know the 401(k) contribution limits for 2019? Is it important they understand the difference between Roth and pre-tax 401(k) contributions? Think about the results you want to see, and then plot your monthly touchpoints.
3. Promote Your Resources Year-Round
Worried about where all of these planning tools and materials are going to come from? While you will likely want to customize your overall messaging, chances are your retirement vendors provide robust resources you can use as a starting point. Curate the vendor materials for your employees and fill in as necessary. You can also look to non-profit sites such as America Saves Week and the government’s My Money for additional resources.
Keep the financial wellbeing and retirement planning conversation going year-round. We all benefit from gentle nudges, especially when it comes to things we may be avoiding.