It’s up to business leaders to help their employees prepare for the future.
The median 401(k) account balance Americans have is approximately $18,500. This isn’t nearly enough for a comfortable retirement.
The 401(k) plans that many businesses offer are proving insufficient when it comes to helping employees prepare for their retirement income needs. This could be due to the features of the plans or a lack of information and understanding around the complex financial demands associated with retirement.
Either way, responsible business leaders need to take action to help employees improve their retirement planning. Learn five ways that you, as an employer, can help your employees better prepare for retirement.
#1. Explain The Difference Between A 401(k) Plan And Retirement Planning
A 401(k) plan is an account, not a retirement plan. Unfortunately, too many people confuse the two and look at their 401(k) as the only money they’ll need for retirement.
Many times, when companies talk to their employees they don’t make enough of a distinction between comprehensive retirement planning and individual retirement accounts. Your employees need to understand that, while it’s very important for them to have a 401(k) account, it is just a small piece of their overall retirement planning, which should also include other accounts, other assets and Social Security income.
#2. Help Your Employees Understand The Need For Retirement Income Streams
Many people think that retirement planning is simply amassing the largest pile of money possible to use during retirement. In reality, retirement planning is much more complex than that.
Comprehensive retirement planning is actually about generating different future income streams that replace current income during retirement. The different accounts and portfolio investments your employees make as part of their retirement planning help them generate enough money to live comfortably during retirement. On their own, 401(k) contributions may not do that.
#3. Make Sure Your Employees Have Regular Plan Reviews
A retirement plan is just like a major business project. It requires much more than sketching a broad plan outline and moving on. Your employees should be making managing their plan a priority and scheduling regular reviews, even after they retire.
Too often, employees make small 401(k) contributions, have a little bit in savings and count on Social Security for the rest. That simply isn’t enough.
#4. Offer Personalized Retirement Planning As Part Of Your 401(k) Plan
Not every plan includes personalized financial planning and participant guidance as part of its overall offerings. To help your employees achieve their personal retirement goals, your plan needs to have this feature.
Consult with your 401(k) plan advisor to find ways to optimize your employee 401(k) plan and improve the benefits you offer your employees.
#5. Auto-Enroll Your Employees In Your 401(k) Plan
Auto-enrollment eliminates the hassle of your employees having to fill out paperwork to participate in your 401(k) plan. This dramatically increases your participation rates and helps ensure your employees are better prepared for their future retirement.
When you help employees improve their overall retirement planning, you’re not just helping them achieve a more comfortable retirement: you’re showing them that you are personally invested in them as individuals, which boosts both employee retention and engagement. Follow the four tips above to help your employees achieve comprehensive retirement planning.
Learn how to maximize the benefits your company gains from its employee retirement plan. View Our Employee 401(k) Plan Optimization Video Series.
