Employers Taking A More Active Role Encouraging Employee Retirement Planning, Contributions
One in three retirees will run out of money during their retirement and small business owners and employees are twice as likely to fall victim to poor planning or financial vagaries.
These statistics are being borne out by surveys from such groups as the AARP and the Social Security Administration (SSA).
Indeed, the SSA estimates that more than half of a retiree’s income needs to be generated by private savings rather than government or company pensions.
In recent studies, small business owners and managers report a marked increase in interest by employees and themselves in building personal, portable retirement plans.
Companies such as Nationwide and T. Rowe Price are projecting a greater need for 401K and other retirement offerings to enable small business employees and owners to save enough to maintain a similar lifestyle such as they are enjoying while working.
As a result of this growing imperative, employers are recognizing the key role this takes in maintaining employee morale. It also reflects the growing realization that older workers, who are most focused on retirement needs, are also becoming more valuable for their corporate knowledge and importance in maintaining the firm's intellectual property.
Employers Taken Active Role
Employers are increasingly taking on the burden of educating workers to the need for building a retirement nest egg.
In the most recent study by Hewitt Associates, plan sponsors are taking a more active role in this process.
Among the most reported actions HR professionals report doing are:
- Personalized, targeted communication demonstrating the importance of saving early and robustly.
- Online tools that allow employees to evaluate what their sources of income in retirement may be—and how much may be needed to maintain their current lifestyle.
- Investment guidance and advice provided either in the form of online tools, third-party source of financial planning, or turnkey investment solutions such as premixed portfolios.
- Automated defined contribuion plan features that automatically enroll employees into the savings plan, seamlessly increases their contributions over time and rebalances the employees’ investment portfolios.
Small Businesses Differ
Not surprisingly, there are generational differences in retirement planning. Equally as important, surveys of small business managers show a significant gap in retirement planning, particularly as it applies to 401K plans and other company sponsored programs.
A recent study by Small Business Digest showed that less than one in 10 employees (9%) of the 3,100 companies surveyed participated in 401K plans, with just 21% of responding managers saying their firms had such offerings.
“What this means for small business employers is that they will need to do more on their own and seek professional advice,” said Christopher P. Jordan, President of Lexco Wealth Management, Inc., of Tarrytown, NY.
His company advises senior managers in large corporations as well as smaller enterprises.
“More and more, we are seeing employees of smaller companies coming to us for advice and suggestions on how to build a retirement program. We are also seeing them bring their concern back to management, who in turn contact us for advice and counsel.”
