It’s over; we can all go home.
With the majority of employees facing delayed retirement or worse, not being able to retire at all, education and wellness firm Financial Finesse has developed a 6-step retirement preparedness model which it urges employers to adopt in order to address the crisis that could significantly impact their workforce.
Greg Ward, the firm’s “Think Tank” director, explains employees who are not prepared for retirement fall into three main groups:
The unknowns – employees who are completely unprepared and overwhelmed. These employees don’t know if they are saving enough to retire comfortably and don’t have the resources, or don’t know where to begin.
The underfunded – employees who have taken some initial steps to plan for retirement, such as running a retirement projection; they realize they are not saving enough for retirement but can’t or aren’t likely to due to other competing priorities.
The under-confident – late career employees who from a financial standpoint, could retire comfortably but are uncertain about economic and market instability and need to be coached through the transition into retirement.
Financial Finesse’s Retirement Preparedness Model “is designed to address the needs of all three groups, using principles of behavioral finance that have been proven to dramatically improve savings rates as well as investment behavior.”
The model’s steps are as follows:
- Prompt employees to run an annual retirement projection
- Set default rate to 10%-plus
- Auto-enroll employees in auto-rate escalation
- Offer benefits-planning education sessions annually
- Use communications to target specific employee-demographic
- Develop a comprehensive financial-wellness program
The company claims the last step alone has been shown to increase retirement preparedness by 77 percent.
“This model is the future,” Ward argues. “For years, all of us in the retirement industry have come at the problem from different angles thinking that there’s some sort of magic bullet that would change everything for participants.” He adds, “The reality is that a holistic approach is far more successful. Tools alone can’t resolve the problem; employees have to fundamentally change their behavior and that requires a very strong support system.”
Financial Finesse CEO Liz Davidson believes the model has tremendous economic implications.
“Imagine if retirement preparedness were the norm, not the exception, and what if you didn’t have to juggle financially supporting your elderly parents with sending your children to college? What if you could rest easy knowing that no matter what happened to the economy, you would be okay; able to retire free from financial worries?” she asks rhetorically “What if we all worked for the fulfillment rather than the paycheck—as independent agents financially secure enough to make choices rather than accept circumstances? The implications of actually solving this problem, or at least putting a major dent in it, are tremendous.”