I don’t have the money to start saving. These investment choices are so complicated. It’s too late to sock away money for retirement. I dropped my 401(k) in a puddle and accidentally put it through the laundry—and *then* my dog ate it.
All of us are good at coming up with excuses—especially when it comes to long-term goals like retirement finances. But employers and plan sponsors are in a unique position to help people remove barriers to saving for retirement, writes Colleen Baker, vice president of enterprise benefit solutions at People Corporation, in the January/February issue of Plans & Trusts magazine. And those that do provide retirement education stand to attract and retain employees at all levels by demonstrating their commitment to financial well-being and improving their total rewards strategies.
The following, based on Baker’s article “Breaking Down Barriers: How to Increase Participation in Retirement Plans,” are five of the top reasons people say they are not saving toward retirement—and steps that employers and plan sponsors can take to improve participation in and contributions to retirement plans.
1. I don’t have extra money to put into retirement savings.
An Ipsos Reid poll showed that nearly half of Canadians said they don’t invest for retirement because they don’t have enough money. Baker suggests that companies use informative, easy-to-understand messaging to overcome this notion, with frequent, targeted communications that meet the needs of employees with differing levels of income and financial knowledge. Other steps could include providing budget templates or encouraging the use of budget apps to teach ways to save and how to get started. Companies that offer matching contributions should highlight this benefit and demonstrate the extra money it can provide in retirement.
2. I barely have enough to cover my bills.
Once plan members have a budget, encourage them to start saving in small increments, using infographics, webinars and other demonstrations to show how small and gradual increases can add up to long-term savings. Make education available through mobile devices, and mail information to households so that workers can share it with other trusted decision makers. Communications plans should be scheduled to send retirement information to employees receiving a raise or bonus, when they are likely to be more receptive to saving money.
3. I have debt that I am trying to pay down first.
Employers can educate workers on different types of debt, perhaps demonstrating the importance of saving for retirement at the same time as paying down long-term debt like a mortgage. Many people in debt need help forming a financial plan. To this end, plan sponsors can offer informative seminars or newsletters or provide access to a financial wellness or employee assistance program. Topics of interest might include taxes, credit counseling, and debt and budgeting assistance. Some employers might be willing to provide access to a financial planner or at least information on how to find one.
4. I don’t understand the retirement program or how to get started.
To combat the complexity of investments and retirement plans, employers can provide a set of answers to frequently asked questions—and make this list and other information easily accessible on a company intranet site. Other considerations include conducting an employee survey to help target specific resources and/or providing informative booklets, employee benefit summaries, and live or recorded webinars. Automatic enrollment in retirement plans has been shown to greatly boost participation.
5. It’s too late, and I’m too old. So why start now?
“It can be overwhelming when employees realize that they are a few years away from retirement with little to no savings,” Baker writes. She suggests that plan sponsors communicate the following steps for those who are late to the savings game: Contribute the maximum to retirement savings plans, consider the pros and cons of investment strategies that aim to earn a higher rate of return, postpone retirement for a few years and confer with a financial advisor.
Related Reading: 23 Questions to Ask When Choosing a Financial Education Vendor
Baker adds that customized materials and ongoing education that are relevant to different life stages and financial situations will be most effective and allow employees to take action toward their own financial well-being. Both sides stand to gain from these efforts. As Baker notes, “Financially secure employees make for a less stressed, more engaged workforce, which is good for the individuals and the employers as a whole.”
Robbie Hartman, CEBS
Editor, Publications for the International Foundation