“A prudent plan sponsor cares not only about the results but the process. They need to pay closer attention to what is going on with the plan and their employees and give them the tools they need to help them help themselves. Employers need to realize that disengaged employees are the biggest obstacle to plan success.” — Mike Montgomery
In a society of instant gratification, it can be extremely difficult to both comprehend and apply long-term financial strategies for acquiring adequate and comfortable retirement savings. This is in spite of the fact that numerous savings and investment tools have been created with that purpose in mind. These savings tools are provided through various programs in many companies.
According to a State Street Global Advisors (SSgA) study conducted in 2012, only 9 percent of participants responded that they had an advanced knowledge when it came to planning for their financial futures.
So what’s missing? A solid connection with workers so they can better understand how to deal with their immediate financial needs and, concurrently, understand the need to invest for the future.
If workers feel bogged down in their present financial problems and are being offered solutions to their immediate financial needs, then they tend to postpone any attempts at saving for the future in lieu of surviving their current financial conditions.
Building a satisfactory retirement nest egg takes time, consistency, and patience, which are areas that seem to be stumbling blocks for the majority of American workers. The failure at prompting Americans to save for retirement has not been due to insufficiency in providing effective tools, but an inadequacy in making people aware of the underlying reasons for their poor savings habits. The “go and save” approach must be altered to better educate employees on how to effectively change saving habits.
What should businesses do?
The focus should shift to identifying causes for not saving sufficiently, and then implementing effective strategies to correct those faults. This requires an ongoing educational program that demonstrates how preparation for retirement is a journey and not simply a destination that people will magically arrive at one day. The day of retirement will definitely come, but if that time has not been considered a part of daily life then the funds for enjoying the golden years will undoubtedly be inadequate, turning what should be a joyous and relaxing time into a constant and harsh struggle for survival.
What is needed is the ability to reach employees where they are by talking about solutions for current financial problems. If we provide them the tools to boost their financial literacy and make better informed financial decisions along the journey, then immediate stress is alleviated. This allows them to better understand how to save more for the future by utilizing available vehicles as well as to provide more income flow to place within them.
It is a wise business decision to put effort into changing the methods by which retirement savings programs are presented, and to help employees discover and change the way they think about saving for retirement. This approach will help to effectively alleviate the financial problems of employees, which will reduce stress at both the home and work fronts. This will, in turn, improve productivity and boost company bottom lines both in the short- and long-term.
Mark Singer CFP® is a leader in the world of financial education. Mark is the author of three books, a frequent speaker at events, and is the creator of The Financial Literacy Toolbox, a virtual resource center to help financial advisors, wellness providers, or institutional retirement services firms change the conversation about financial wellness. To receive a free copy of Mark’s newest book “The New Financial Wellness: Changing the Conversation” please contact him at mark@financialliteracytoolbox.com, or go to his website at www.financialliteracytoolbox.com.