“By changing the company culture, we can help lessen the fiduciary burden so they can face the issues and get ahead of the challenge rather than chasing it afterwards. We have to be patient when working with our sponsors. They have a lot on their plates, and it takes time to change a culture. The more we tell them, the better it will be, but we have to show proof of success for them to buy into such a cultural change. They don’t want to get too personal with their employees. They know that they have issues and they may find it awkward to address these sensitive issues.” — Mike Montgomery
We know employees are not saving enough for retirement. We also know that traditional methods of presenting retirement options for employees are not adequately encouraging participation. It’s time to change the conversation in a way that empowers participants to self-correct behavior and move towards fulfilling their financial goals.
Working with Financial Providers
Methods currently to encourage higher participation are not effectively connecting with the majority of employees. This especially applies to workers who are 35 years old and younger (Millennial generation), which is the lowest group to participate in 401(k) and other retirement savings vehicles (41 percent), compared to workers aged 45 years and older (71 percent).(1)
Therefore, employers must work with 401k financial providers to offer financial wellness and literacy programs to their employees that will help change the conversation from one that mainly emphasizes the need to save for a distant period in life, to one of effectively dealing with immediate and daily financial needs. By addressing current needs and providing workable solutions, employees will be able to improve their financial decisions and more effectively save for future retirement needs.
The conversation needs to move away from a focus on savings calculatrs and future goals, and towards financial wellness methods that solve current employee personal financial problems. This is an important part of the formula that provides them with a means for tactical execution of immediate issues, allowing them to achieve greater degrees of success.
This type of “here and now” approach is particularly useful for the younger workforce, which tends to be more focused on current problems and issues, instead of simply telling them how to plan for some distant, faraway retirement. If they are taught how to meet these short-term goals best, then more finances will become available and more effort will be made in fulfilling long-term goals. Financial wellness programs, therefore, help workers better understand how saving for retirement is a journey of short, attainable financial goals, culminating in greater long-term financial security.
By making this full circle connection with employees, they will see the small steps they can take now to give them the resources needed to participate in retirement plans and preparing for their future. We have to provide them with the tools to make these changes, rather than just providing them with the plan options without educating them.
Montgomery, Nicole, Szykman, Lisa, Agnew, Julie (2012). How Can Employers Encourage Young Workers to Save for Retirement? Available from crr.bc.edu/wp-content/uploads/2012/03/IB_12-7-508.pdf