A troubling issue plagues the American workforce—a lack of savings and retirement preparedness. The results of a December 2014 poll conducted by Bankrate revealed that a staggering 62 percent of those responding did not have sufficient savings to cover large, unexpected life expenses.
Americans’ savings efforts have declined over the past several decades, and the 2007-2008 financial crisis compounded the problem. If a majority of Americans don’t have enough savings accrued to cover unexpected life events, then they also do not have adequate savings set aside for retirement.
Around half of U.S. businesses are spending resources in efforts to address retirement savings issues with their employees and only a handful of employees are taking advantage of the tools made available to them. Many of those who are making an effort to place money in retirement savings plans are often borrowing against them to meet pressing financial needs.
Another reason for such a poor showing for retirement savings lies in companies missing the mark when it comes to delivering effective communications and education plans. They try to provide good information about how to invest for the future, but studies show that employees do not actually hear the message. We need to address the journey as much as the destination, and that means delivering more effective financial literacy tools to employees.
“Advisors need to listen to the concerns of the participants and help them solve their problems. An enrollment meeting cannot be a “one and done” discussion. It is an ongoing conversation.” —Charlie Epstein
What is being missed in the current retirement savings conversation is a connection with the emotional side of employees. They need to not only think about retirement at a future date that can be completely segregated from life today, but they also need to understand how savings, or the lack thereof, will affect their lives in the future.
“Each participant must ask themselves one single question as they enter into an enrollment meeting…Am I serious about saving for my future or not? They own the future visions of themselves.” —Charlie Epstein
If people are expected to increase their contributions and savings they need to be motivated to do so, inspired almost. It is a tough reality and one that will hit sooner rather than later.