Is there anything that brings out the best in human nature more than money? We usually have a reasonable notion of what is and isn’t best for us, but where things get complicated is in the distinction between our wants and our needs. What seems important to us today may conflict with what is best for our future. While we may never be able to provide a short-term financial path that prevents employees from getting in their own way, we must ensure that we provide a long-term path to success.
We are all aware that there is an abundance of information available. The internet and social media have given everyone a voice – and a chance to be thoroughly confused by misinformation and half-truths. You have a unique opportunity to promote proven financial realities as a trusted employer for each of your employees, cutting through the endless selection of easy buttons that continually demand their attention.
Well, where to begin ?
Regardless of knowledge, experience, income, gender, or age, we all start from the beginning when it comes to 401(k) savings. Signing up for a 401(k) can be exciting for some, but for most it’s a frantic race to tick the right boxes and hope for the best. Let’s identify how we can turn this obstacle into an opportunity for two common groups of savers.
Early Career Savings Recruit
New savers need to see the incredible and irreplaceable value of a quick start. An automatic sign-up method is the best way to engage this demographic. Whether it’s retirement savings or organ donation, the data shows we’re unlikely to opt out.
Beyond the mechanics of auto-enrollment, there’s a story to tell about how this process is helping more employees than ever achieve their goal of financial security, flexibility, and confidence. Employees should start with what they can afford and increase by 1% each year until they reach a total of 15% savings. Before you know it, they’ll be getting the full employer match, saving more than they ever thought possible. Moreover, they would have done so without derailing their current lifestyle.
Interestingly, many employees feel that auto-enrollment somehow benefits their employer. Employers need to consider this misunderstanding when implementing auto-enrollment, making sure employees understand why it’s beneficial to them, and using the data to present the results they’re likely to see if they are listed, versus if they are not. Establishing a clear narrative from the start and communicating in a transparent and easily understandable way will help earn their trust.
The prodigal savior
Savings detours are more common than not. Whether an emergency, opportunity, or simply mismanagement of money creates a void in savings, it’s essential to get back on track as soon as possible. The number one culprit preventing employees from saving as much as they need is debt.
Regardless of how an employee accrued debt or how long it took to pay it off, there are ways to reduce debt while increasing savings. An easy way to create an accessible and inviting financial wellness program is to provide constant access to a variety of topics that are beneficial to the employee. The simple concept of using lump sum assets, such as tax refunds or bonuses, to pay off debt while automatically increasing 401k contributions by 1% each year helps employees breathe easier and focus on increasing productivity. It’s a win-win.
Registration… Who controls?
Take the historically overwhelming task of getting started and turn it into a non-event. With a strategy designed to “pre-define” success, your employee base can take full advantage of one of the most important benefits you offer them. Once they’ve established a savings habit, you can move on to more in-depth education on investing and Roth options versus pre-tax options.
While every employer’s enrollment process is unique, the ability to start saving within 60 days of hire has a significant impact on how employees view the benefit and how their employer views them. . Even if you offer “dual eligibility,” where participants can start saving immediately but won’t be eligible for a match for a year, you’re setting them up for success.
Catch your new hires early with a simple summary of what the 401(k) offers, the decisions they’ll need to make as they enroll, and the deadlines they need to be aware of. A simple PDF with plan highlights and who to contact for service or advice will help employees understand the value you place on this benefit, from their first interaction with the organization. Even better, a 10 minute video introducing the 401(k) and talking about the incredible value this tool can bring throughout their career. Attachments introducing Roth, beneficiary election and rollover forms will keep your employees informed and reduce the number of calls your HR/Benefits team receives.
Ultimately, it’s a confusing world for employees, but the 401(k) is the tool every team needs. Make this year the year you work with advisors to refine this tool and create processes that aim to help your employees achieve their financial goals. It will show them that they are known, heard and on their way to the finish line, no matter where they start.