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April Top Advisor by Participant Outcomes (TAPO)

Savings Over Cigarettes: A Reason For Immense Pride

The average American has a household income of less than $40,000 a year. It’s this group on which my firm focuses, because we believe they’re forgotten in many ways and we want to ensure they are looked after.

401k participants in this income range are generally not concerned with retirement planning, college planning or any type of financial planning at all. They’re instead focused on whether or not they can afford to buy a new tire if they have a flat, or to treat their family to pizza on a Friday night.

We therefore employ a very subtle tactic in the way in which we approach employees, and it has to do with how we communicate as much as what we communicate. Simply put, we’re careful with our word choice to ensure that understanding and action are maximized.

First, we want to make sure they understand that Social Security is going to be a big part of what they’ll have for retirement. It’s a fact that almost everybody will see (at least) close to $1,000 dollars in Social Security on a monthly basis. It might not sound like much, but a quick review of the numbers finds that it’s the equivalent of $250,000 in a 401k that returns 5 percent per year.

For many people, that’s a lottery win. They’ll never see $100,000 in their 401k, let alone $250,000. When put in those terms, it’s a big number and it makes it easy to ask if they’d like more. The answer, of course, is always yes, and it’s a way to get them excited for saving.

Forget salary deferral and savings rates—we talk about pennies from a dollar.

Having informed them that they’ll have a source of retirement income equivalent to $250,000, we then ask for pennies on a dollar. It’s suddenly not so daunting. Would they be able to set aside just one penny from every dollar this year? Again, the answer is always yes; never once have we been told no.

It makes it that much easier to transition to a discussion of auto-escalation, and taking that one penny up to three to four.

For this reason, we have extremely high enrollment rates on the plans that we service—usually in the high 90 percent range. It makes it real for the participant, and it’s a number with which they can deal.

We’re then able to spend one-on-one time with each participant, and this is where we make the most impact, as the following anecdote illustrates:

Two months ago I had a conversation with a security guard at a company whose plan we service. It was a friendly conversation that began as small talk as he escorted me back to the cafeteria following an education and enrollment meeting. He makes $17,000 per year, and essentially lives paycheck to paycheck.

I asked how his 401(k) was doing. He said fine and volunteered that he had quit smoking. I expressed delighted surprise and asked him when.

“Six years ago,” was his reply. “You sat with me in an individual meeting, I explained my situation and you said if I gave up the cigarettes and put that money in my 401k, I’d have a significant amount set aside when I decided to retire.”

He told me he walked outside and had one last cigarette, tossed the pack, and since that day, six years ago, he has saved an additional $1,500 each year. For a guy who makes $17,000, think that might make an impact?

This is our job—to teach people how to save. It’s the most important thing we do, and something of which I am immensely proud.


George P. Fraser, CRPS, is managing director of Retirement Benefits Group in Phoenix, Arizona. George and his team are committed to helping employers and employees secure the lifestyle they envision for themselves upon retirement.  After 19 years in the retirement marketplace, George has developed an educational model that offers both group and individual meetings to all of his client’s employees.  His model, considered by many to be second to none, was showcased by the Arizona Republic as a model for change. George and his team currently manage over $300 million in over 35 plans.

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