Today’s economic conditions have placed most working Americans in a tight spot unlike anything since the Great Depression.
And it’s made savings – especially long-term savings – less and less of a priority, putting many in a retirement savings crisis.
Most Americans acknowledge that they need to save a large sum, saying they’ll need at least $1.46 million to comfortably retire. Those same Americans are most likely keenly aware of how far they are from that goal, having saved an average of only $88,400.
This means that the average American is looking at a $1.37 million gap. And there’s likely an even higher savings gap for many, considering that these averages are often skewed due to extremely high-wealth individuals. In fact, according to a recent report by CNBC, 44% of Americans can’t cope with an unexpected $1,000 expense.
Your Role in the Retirement Savings Crisis
While retirement savings are primarily the responsibility of any given individual who wants to ensure the financial security of their future, employers have a key role to play in helping their employees navigate today’s retirement savings crisis.
While most employers already feel a responsibility toward their employees’ financial wellness, still too many forego offering retirement plans altogether due to the financial obligations and operational burdens they entail.
There are, however, ways for employers to support employees in their retirement savings without those time, finance and resource-heavy burdens. Here are three methods for employers to help employees secure their financial security today and tomorrow:
Tap Your Technology
Why do employees fail to save for retirement in the first place? One of the key factors is simple enough: poor accessibility to the retirement plans that help to make those savings a reality.
While companies know that offering retirement plans is a key competitive measure in hiring, concerns about high initial start-up costs, related processing fees, and options such as employer match costs present a concerning financial picture, especially if a business is tight on expenses.
For smaller businesses, the cost of benefits management teams can present a seemingly impassable barrier. In fact, two-thirds of small businesses don’t offer any retirement benefits and nearly half of them (48%) worry they can’t offer a retirement plan, according to a recent study by Fidelity.
Even for businesses tight on budget, there is a way forward that cuts down on costly administrative burdens and costs associated with retirement planning.
Companies now have the tools available to them to automate and streamline administrative processes associated with 401(k)s and other types of retirement plans. By leveraging technology to automate processes that cost HR teams hours (such as contribution payroll and compliance duties), HR teams can focus on what matters most: employees. Technology can automate even the most detail-intensive tasks that are required of retirement benefits administration, ensuring plan accuracy and compliance and ultimately speeding up plan delivery to employees.
In other words, retirement benefit automation means greater accessibility for small-to-medium-sized businesses lacking the traditional resources required to offer 401(k) and other retirement plans. These businesses can now offer plans that ensure employees’ financial future and keep them competitive in the job market — without the administrative hassles and financial costs.
Provide Tools to Understand
It isn’t quite enough to simply offer retirement plans. Employers must also make certain that their employees understand the benefits available to them, how they can personalize and maximize those benefits and what exactly those plans do for their futures.
Whether it’s trained financial advisors brought on to regularly advise employees on the importance of retirement savings (and timely contributions) or making more targeted financial education resources available (e.g., how to manage student loans), employers should get creative in their financial and benefits education planning to tailor to employees’ needs.
In addition, businesses and organizations must prioritize regular communications with employees, particularly whenever changes are made to their plans. Sending a long company-wide document or email explaining the change isn’t enough. Efforts must go into ensuring that what it all means is properly explained, and employees should know that they always have opportunities to reach out if they have questions.
This level of communication is particularly important during what many today dub an ‘age of misinformation.’ Employees may make decisions based on retirement information they see online that may not be accurate. This is where employers can step in to communicate clearly and openly with employees about changing policies and the evolving retirement landscape to increase transparency and help employees be better educated about their benefits.
Transcend Traditional Retirement Benefits
While almost every working adult has heard of 401(k)s and Roth IRAs, new options are available to businesses today. One example is under the SECURE Act 2.0, which offers employers more accessible means of offering retirement plans beyond the traditional 401(k).
The “Starter 401(k)s” offered under the act are employer-sponsored plans that provide automatic enrollment wherein employees can contribute up to $6,000 annually, tax-free. This method demands fewer costs for employers — including less of an administrative burden — and doesn’t require employers to make contributions themselves.
Employers can also choose to focus on expanding other, non-retirement benefits in ways that are most relevant to their employees, whether it be vacation time, sick time, health insurance or commuter reimbursements.
To make benefit decisions that will be more beneficial to employees, employers can survey employees or ask them directly what their priorities are. Expanding non-retirement benefits is a great strategy for helping employees into a state of financial ease to allow them to begin thinking about retirement.
While retirement plans have long been an expensive and often inaccessible benefit for many employers and organizations — particularly smaller businesses — there are ways that employers can better ensure their employees’ financial futures.
