Turning Chance into Change
It wasn’t that long ago that retirement meant getting a good rocking chair on the porch and watching the world go by. We retired at age 65 and died by age 72. It didn’t take much planning or consideration to support seven years of retirement. But today, life is very different. If you make it to age 65, the odds are you will likely live another 22 years. A married couple has nearly fifty percent chance that at least one of them will live well into their nineties1. That means we must be prepared to potentially live up to thirty years off our savings. This is a new phenomenon that has yet to be truly understood by employees. In fact, even employers are a bit at a loss as to how to manage the implications of this.
Financial wellness means financial freedom
The realities of retirement today mean employees face numerous uncertainties. This can erode their sense of confidence and potentially cause financial stress. PwC’s 2018 Wellness Study found that fifty four percent of employees reported being stressed about money. Overall, a disturbing forty-two percent of those surveyed said it was likely they would need to use money held in retirement plans for expenses other than retirement. That number was even higher among employees who were stressed about their finances or impacted by student loans.
According to various studies, 33–40 percent of Americans are living paycheck to paycheck, which means chances are that as many as four out of every ten of your employees are likely making unwise financial decisions. People who live paycheck to paycheck are under tremendous stress. It’s emotionally taxing to run out of money before the end of the month.
Once your employees understand that little actions they can do today can dramatically change their lives in their future, they will gain more confidence. When employer’s support a strong retirement benefit and education program, employees can get on the path toward retirement success. You can lead change and help your employees set the pace for a renewed approach to their futures. Of course, such a shift doesn’t happen overnight, nor is it easy to accomplish, but the greatest rewards in life are rarely, if ever, easy. You can begin the journey of leadership now and reap lasting rewards as an advocate for your employees.
Surveys show 401(k) plans are the second most important benefit you can offer based on feedback from employees2. Indeed, if your employees aren’t taking advantage of the plan, it’s probably because they are not properly educated about the realities of retirement today. The most talented and qualified employees have acknowledged that having access to a 401(k) is very important to them3.
Employees want help with their finances
Of course, it’s not just about participating. It’s about saving sufficiently and investing wisely to seek to maximize growth potential. As an employer, good stewardship means stepping out of your comfort zone or casting off your complacency and working to build a strong retirement plan. Your business will benefit with reduced financial risks, lower employee costs, and increased productivity. In other words, you can turn chance to change. And remember, you don’t have to do it alone. In fact, a great 401(k) team can do most of this for you. It just takes a desire to make a difference in the lives of your employees.
1 2018 Organization for Economic Co-operation and Development. 2 Paychex HR Survey. 3 Hartford Business Owners Playbook.
Terri McGray, CFP® is founder and president of Longevity Capital Management LLC.
This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
For Plan Sponsor Use Only – Not for Use with Participants or the General Public
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