In today’s job market and with the increasing amount of worker turnover, employers are always looking for ways to drive employee engagement, increase employee satisfaction, and improve employee retention rates. For most employees, a driving force behind turnover is the worry about whether or not a position will prepare them for retirement.
If you are a business owner who takes his responsibility for setting up a well-designed business seriously and has even hired an attorney like Aaron Kelly who specializes in entrepreneurial law, you have a great opportunity to ease your employees’ minds about their own financial futures. You might even endorse yourself as a sought-after company by helping your employees understand and prepare for retirement through this five-step process.
1.Assess employee need. Before any plans can be made, assessments must be conducted to determine their current situations. Offer employees confidential evaluations through a third party, and make sure that they know that no one in the company will know the results of their financial assessments.
While we all dream of retiring in comfort and living out our golden years with access to all of the benefits afforded to us as a result of a lifetime of hard work, many employees have no understanding about the many difficult decisions and complicated choices that lead to their ability to save adequately for that lifestyle. In fact, less than half of American adults have calculated what they will need to save for retirement. Helping employees understand and think about what they are working toward is an important first step in the process of becoming retirement savvy.
2.Educate your employees. The more your employees know about retirement planning, the better. Retirement planning education should explore a variety of topics other than what your company-sponsored retirement plan offers. You can offer training on things like budgeting, personal finance, life insurance, information about social security benefits, long-term health planning, signs of concern in retirement preparation, and home ownership—all of which will go a long way in helping employees think critically and holistically about their financial scenario and prepare for retirement.
3.Contribute to employee retirement. If your company can afford it, consider offering 401k matching or profit sharing for employees. Many employers offer a 401(k) defined contribution retirement plan instead of pensions, which are quickly become a thing of the past. A 401(k) is a deduction made from employee paychecks, but many employers contribute to their workers’ retirement by offering incentive matches, which may range from 2 percent to up to 10 percent of what the employee saves.
Small to midsize businesses may need to get creative about retirement options for their employees, but discretionary matching might be something to consider. This will encourage them to participate, and it will show them you care about them and their retirement.
4.Automate the process. You may want to think about auto-enrolling employees in the company retirement plan. Once your employees get used to automatic contribution (and deductions from their checks), they will likely continue it. On the other hand, if an employee does not want to contribute to the retirement plan at first, he or she will have a tough time catching up. In 2016, almost 30 percent of private industry workers with access to a defined contribution plan like a 401(k) did not participate in the program, even though experts say retired individuals will need 70 to 90 percent of their income to maintain the same standard of living when they stop working.
Two-thirds of American workers do not maximize the contributions they are allowed to set aside, and a surprising number of employees contribute nothing at all to their retirement funds. Find ways to encourage a retirement saving mentality, which includes streamlining the process and making it as easy as possible for your employees to contribute.
5.Offer Alternatives to a 401(k). A company-sponsored retirement plan is a great benefit, and you should be proud to offer it, but you can do more. It may be worthwhile to bring in partners from local banks or other financial institutions so employees can establish their Roth IRA, college savings accounts, or any other savings plans they may be interested in that may help them save. The changing nature of employer-provided pensions and issues related to social security means that American workers must save on their own to be retirement ready.
Consider recommending financial planners to help alleviate the worry and stress of long-term financial planning and to ensure that your workers are aware of their long-term retirement needs so they can plan accordingly.
What are some things you think a company can do to help you become retirement ready? Feel free to share here.