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Key takeaways
- Say “retirement” and younger employees’ eyes glaze over. To capture their attention, focus instead on what matters now and take care of the rest behind the scenes.
- Even when employers fund employee retirements, there are ways to get workers to do other things that might put them on the path to financial stability.
- Developing a retirement plan can seem like rocket science, so show employees how you can help them and that you’ve got their backs every step of the way.
How to get busy, distracted employees involved in retirement planning.
When you’re engrossed in running a retirement plan and other benefits, it’s easy to forget not everyone knows the details of, say, the contribution limits or the target-date glide path design. Many employees may not know whether they’re investing, much less on track, for retirement. And no shame on their game—our minds can’t be everywhere at once. You may not think about your tire pressure or the age of your roof as often as you should, though both are important.
In truth, it’s a struggle to get employees to pay attention to far-off-seeming concepts like retirement savings unless they are preternaturally interested. We turned to some experts for new thinking around engaging employees so they can better help themselves.
What are the best ways to help younger employees start saving for retirement earlier?
- Healthcare organization
Vin Smith
Partner and Defined Contribution Practice Leader, Fiducient Advisors
To start, let’s look at why employee engagement is so hard. We’re in a battle with the attention economy—the demands far exceed supply. And it’s worse with younger workers. Very little gets through, especially when it comes to retirement.
It’s even harder to get
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For all these reasons, we believe automatic enrollment and auto escalation make the most sense to help employees start saving when they feel they can’t do it themselves. We recommend a conservative starting point—say 1% to 3%. It’s less about how much they save on day one and more about establishing the saving habit. Then we pair automatic enrollment with auto escalation to give their savings a better chance of growing.
When it comes to getting employees to engage, we focus our efforts on
But education doesn’t look the same in every workplace. Healthcare workers can’t leave their shift to attend a meeting. Consider more creative or organic conversations—such as a human “mobile financial wellness help desk” who walks the floor with teams during their shifts. If we expect to get their attention, we need to meet them where they are.
What steps should employees take when they approach retirement?
- Small higher education institution
Glenn Jensen
Managing Director, New England Retirement Consultants, LLC
About seven to 10 years ahead of time is a good time to ask: “Do I have the right investment mix for my time horizon? Am I comfortable with the risk level, knowing I’ll need to draw upon that money soon?” It’s about striking a balance between stability and growth.
Within about two to three years of retirement, employees should get serious with post-retirement planning. It starts with two key questions:
What retirement expenses will I have?
Look at your fixed costs: rent, mortgage, taxes, transportation, food and other things you’ll need. Then, consider some bigger questions: How’s your health? Will you have immediate healthcare costs such as premiums, copayments, prescriptions or other costs not covered by an HSA? The more specific you get about expected expenses, the better.
What are my income sources?
How will you pay for those expenses? Most people get some Social Security income. You also might get income from a part-time job. The rest comes from savings.
One of the biggest retirement fears is outliving one’s savings. And let’s not lose sight of inflation—over time, it can erode your spending power. While Social Security has a cost-of-living adjustment each year, it doesn’t always keep up with rising costs. At retirement, it may be wise to consider an income annuity with a cost-of-living adjustment, or COLA. It
Beyond these basic questions, retirement planning can get complicated quickly—when should I
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We provide a very high employer contribution. How can we get employees to contribute more of their own money?
- Large higher education institution
Chris Schaefer
Senior Advisor, MV Financial
Short of automatic enrollment, it’s hard to get employees to contribute to a plan when they think they’re covered by generous employer contributions. So getting employees to save their own money typically involves several strategies tiered to meet their needs.
The first tier is plan design—does the plan offer the features and benefits employees need to feel comfortable putting money into it? We look at eligibility requirements, vesting and distribution options, and help employees understand how they can get their savings if needed or if they leave.
The next tier is education. Educate workers about important financial concepts, such as compound interest, to demonstrate the benefits of saving early. Talk about asset allocation to address risk concerns. Often education alone isn’t enough. Employees need action steps, such as “10 ways to get on track.” And we need to tailor those steps to their personal circumstances.
That gets to the top tier: one-on-one advice. For some, saving 15% to 20% can feel unattainable, even with healthy employer contributions. Advice can help them make incremental changes that fit their circumstances.
In some cases, voluntary participation isn’t always the next best step. Some people may need to pay down credit card or student loan debt or build an emergency fund. Help them cross those things off the list, and then they can start contributing to the plan.
Lastly, I can’t overstate the value of employer support. I’ve always found a strong employer message around wellness goes a long way—not only physical wellness, but also
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. TIAA and the consultants, or any of their affiliates or subsidiaries, are not affiliated with or in any way related to each other.
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