Employee Financial Planning Issues

Spring 2018

Our economy has given us a bumpy ride since 2009, and there’s no end in sight to the volatility. Economic slowdown, housing and mortgage crises, government bailouts – they’re hard to predict, and seemingly impossible to control. But the bigger problems don’t prevent individuals from working toward a secure financial future. The best place to start? That 401(k) statement – and the means to understand goals and investment options.

Employer-sponsored financial education can be the solution employees need to buffer themselves against economic downturns, and more importantly, take control of their future. Employees need to understand options to improve their financial security, and to make time work in their favor in planning for their retirement. If employees aren’t equipped with that essential knowledge, 401(k) balances may stagnate or fall. And worse, blame may be placed on you, the benefit provider. But the good news is, employers can help.

Make a long-term commitment
Put an education plan in place, and realize from the start that it needs to be a continual process. There’s a lot to absorb, and employee needs will vary by age, income, and life situations. A parent saving for a child’s education has longer term goals than an employee close to retirement who may be focusing on short-term investment options. Employers can make a real difference in all these situations by acknowledging the need for ongoing financial education, and by providing employees with that support.
Consider these findings:

  • “A large percentage of American workers see that the U.S. retirement system is going through major changes, but many are not taking steps that are likely to leave them well-positioned for a comfortable retirement.” 1
  • “Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000.” 1

Providing a company-sponsored retirement plan makes you one of the best employers to work for. But merely offering a 401(k) isn’t enough. You need to capitalize on your investment by providing employees with the information and tools to understand choices and better control their financial futures.

Retirement 101 – Know the target number
Many employees don’t know how much they’ll need to have saved in order to retire. A 2007 survey by the Employee Benefit Research Institute (EBRI) showed that only 47 percent of Americans had even tried to calculate how much they would need to save. The reason is probably not lack of interest, but fear. Many employees worry about retirement, but don’t take steps to prepare for it.

Planning can ease the worry – and that’s where education comes in. Employers who supplement retirement benefits with education increase the likelihood that employees will change the way they save. The same EBRI survey conducted in 2008 found that 44 percent of people who actively tried to understand and plan for their financial future made changes to their retirement savings plans.

The return on your investment
Providing financial education can boost employee satisfaction, loyalty and enhance the perception of your benefits, making your organization more attractive to job seekers while increasing appreciation among your workforce. Plus, you send a message that goes far beyond financial planning. You demonstrate a concern for employees on a personal level, because you’re helping them find satisfaction after they’ve left the corporate family.

So, it’s easy to see that offering education is a great idea. The next question is, how?

One way is to send employees a series of newsletters or articles with topics such as maximizing investments and savings, prudent levels of insurance to protect spouses and families, how company benefits supplement those needs, and in general, how to  prepare for retirement as well as earlier, unexpected financial needs. And there are many ways to do this – via email, intranet home pages, mailings, and printed materials in the workplace.

Team with an experienced partner
Creating a successful financial education program can be a daunting challenge. Fortunately, you don’t need to do the work. BeneCom Associates has helped many employers promote their 401(k) plans and educate employees about making important financial decisions. We can help you, too.

Help give employees the information they need, while making the process easier and more effective. For more information contact us at 860.674.2626 or online at https://www.benecomassociates.com.

1. 2007 17th annual Retirement Confidence Survey (RCS)