If I Had a Million Dollars
Employee Benefits Communication Should Include Retirement Education
When it comes to saving for retirement, many question why saving today matters so much. Does this sound familiar? I’m sure it does to many of your employees. If so, you’re definitely not alone, as for many, living for today and spending on today’s fun is what’s top of mind. Creating an urgency to save for retirement, especially within a younger workforce, is an issue all employers must learn to combat.
In speaking with our Assurance Financial Services ("AFS") experts, below are a few tips to help your folks start saving today for their tomorrow.
Automation – Simplify the ability to join and save adequately.
Step #1: Auto-Enrollment – AFS suggests employers auto-enroll employees at a minimum percentage (e.g. 5-8 percent) or a default percentage that will maximize the employer match.
Step #2: Auto-Deferral Increases –Unless the employee takes action or exhibits management over the account, their deferrals would increase by 1 percentage each year until they’re deferring at a suitable level to achieve retirement readiness (e.g. 10-12 percent). Some oppose automation as there’s a belief that the employer is forcing the employees to save. This is a huge misconception and simply not the case. In fact, the employee is still fully in control with auto-enrollment
Match Optimization – Restructuring your match over a higher deferral percentage encourages the employee to participate or defer at a higher rate. For example, in lieu of $0.50 on the dollar up to 5 percent, consider $0.25 on the dollar up to 10 percent. In other words, by stretching the match, an employee will likely save more of their dollars in their retirement account to maximize the employer benefit.
Understanding Matters – Making sure your employees have a good sense of retirement readiness and financial wellness is key in getting them to participate and maximize the benefits of your retirement program. Messaging should focus on changing behaviors and ensure clear understanding of what’s needed to support a successful retirement – even if it’s decades down the road – as retirees run the risk of outliving their savings.
Every employee has the goal of not working one day, but employers often fall short on making sure they understand how to make that happen. Focus your communication around:
- How much is necessary to live off of in retirement
- The plan provider's tools that create retirement readiness awareness
- Simplifying the investment process
- Integrated benefit messaging
Help your employees get the big picture outlook on their future. For more information and guidance, please contact an ‘A’ Team member to chat.
ABOUT THE AUTHOR