Retirement plan advisors share a common goal with plan sponsors. This is to help American workers control their own destiny by planning for a more comfortable and secure financial future. In this post, we outline seven steps to retirement readiness for both plan sponsors and for employees.
Some employees are already following some or all of these steps. They are using the retirement planning benefits available to them through their employer to save and invest for the future.
Many people are getting the message about the importance of retirement planning. In the latest Retirement Confidence Survey from the Employee Benefits Research Institute (EBRI), more workers report rising confidence their financial ability to cover basic retirement expenses and to live comfortably throughout retirement.
Where Retirement Anxiety Runs High
Too many people remain on the other end of this spectrum. They’re facing a shortfall in meeting their retirement savings goals, if they have any savings at all. They also lack confidence in their ability to retire comfortably.
A lack of retirement readiness is particularly acute here in the Washington D.C. area. A recent AARP survey discovered more than half of D.C.-area adults feel anxious about their financial security in retirement. That’s not surprising when you consider 45% of Washingtonians have less than $25,000 put aside for retirement.
One of the biggest differences between these two groups—the confident and the doubtful—is having a retirement plan.
Among workers who participate in a retirement plan, only 26% say they have low or no confidence about having enough money for retirement, according to EBRI. This number jumps to 57% for those who do not have a plan for retirement savings.
Non-participation in a retirement plan also appears to correlate with low savings rates. EBRI found that overall one-quarter of workers have less than $1,000 in savings and investments. But a majority of these workers (67%) also don’t have a retirement savings plan.
Seven Steps for Plan Sponsors
The road to retirement readiness starts with the plan sponsor. Here are seven ways plan sponsors can seek to improve retirement readiness through the design and communication of retirement planning benefits:
- Incorporate retirement planning benefits as a part of your health and wellness benefits
- Make it easier for employees to participate with automatic enrollment and salary deferment increases
- Enhance matching contribution
- Review participant education materials to see if they meet the needs of all participants and plan an education strategy with scheduled meetings
- Promote financial literacy programs offered by your plan provider
- Extend help to pre-retirees making the transition to retirement
- Raise awareness of Saver’s Credit, catch-up contributions and Roth 401(k) features to eligible employees
Seven Steps for Employees
Plan sponsors can have a strong influence on how employees use the retirement planning benefits available to them. Here are seven ideas to share to help employees take a more active role in planning for their financial future:
- Calculate retirement saving needs
- Write down a retirement plan strategy
- Learn more about retirement income sources (e.g. Social Security)
- Enroll in a workplace retirement plan and contribute as much as , at least enough to qualify for full matching contributions from
- Look at retirement benefits as part of total compensation
- Take advantage of the Saver’s Credit and catch-up contribution if eligible
- Ask for help when needed—professional advisors can play an important role in helping to promote retirement readiness
Plan Sponsors Have the Power
Today, there’s a greater focus on wellness, not only from a health care standpoint but also from a financial one. Many studies have found employees who have taken steps to improve their financial wellness feel happier at work. And happier employees tend to be more productive.
If retirement plan advisors and plan sponsors are committed to their mutual objectives (to help all workers control their financial future), then they must assist all workers in taking advantage of these benefits. That includes using the tools of plan design and participant communication to help make saving and investing easier for workers.
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