The Single Biggest Impediment to 401k Financial Success?

401k, savings, retirement, participants

He's not happy.


Have you ever thought about the single, biggest obstacle to the success of plan participants in meeting their financial and retirement goals?

The best strategies take advantage of opportunities while overcoming obstacles.  You can have the best-laid retirement plan, but employees won’t be able to fully utilize it and become engaged unless you address the biggest block to your employee’s financial success: debt.

The Wall Street Journal finds 70 percent of Americans are living paycheck to paycheck, with the U.S Census reporting 24 percent of take-home pay is wasted on nonmortgage debt. More concerning, almost two-thirds of Americans can’t cover a $1,000 emergency without borrowing money, according to CNN Money.

It’s an issue, and financial wellness is the answer.

Traditional retirement plan education focuses only on saving for retirement. But many employees are struggling with debt and how to manage their month to month expenses. To help meet this education gap, our firm has created a financial wellness solution to help better engage the plan participants we have the privilege to serve.

The first step (of course) involves planning. We partner with our clients to determine their key financial wellness benefit goals and how we can most effectively structure the benefit to ensure the largest impact possible.

The goal of the financial wellness benefit is to help plan participants address and overcome financial scarcity—supporting their journey from a struggle to make ends meet to financial security and a focus future financial goals.  Our plan sponsor clients find it can lead to higher productivity, better benefits appreciation, lower turnover and more engagement.

The second step involves execution. There are ways in which a 401k advisor and plan sponsor client can implement a financial wellness benefit program to help improve employee financial health and support long-term behavioral change:

  1. Each employee receives a personalized strategy with action items based on their key priorities and concerns through our online learning center;
  2. Complementing the personalized strategies with custom education add-ons, including workshops/webcasts or videos focused on key life events; and
  3. One-on-one meetings with a financial planner to receive personalized financial guidance and take positive action.

The third step is the review and measurement. Once the financial wellness benefit is implemented, committee meetings take place to review initial goals, show the relevant ROI and highlight the employee impact resulting from the financial wellness benefit program.

Once employees are confident with their current financial health, a dramatic improvement of matching utilization, increased deferrals, increased use of plan tools (outcome analysis) and fewer loans and withdrawals from the retirement plan are realized.

One of our greatest privileges as 401k advisors is working with organizations that view their role as a “steward” and truly desire to do everything possible to help their employees thrive. A financial wellness solution helps a retirement plan participant remove barriers and enables them to become just that—better financial stewards. This can make a huge impact in employee’s lives and help impact our client’s (meaning employer’s) bottom line.

Todd Timmerman, CFS, CEBS, AIF, is managing director with Charlotte, North Carolina-based Retirement Plan Analytics.

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