Are Your 401(k) Participants Retirement Ready?

There are many reasons companies implement a 401(k) plan:

  • To benefit the owners
  • To attract and retain high-caliber employees
  • Because it’s the right thing to do

All are valid justifications, but the most important reason is to make sure your employees are prepared for a successful retirement. If that is not your motivation, you may need to re-think your priorities. Ensuring that your employees are retirement ready certainly benefits the individual employees, but can also have a significant and positive impact on the company, as well. Here’s how.

When your employees come to work each day, many bring with them lots of baggage. Perhaps an employee has family issues, or someone cut them off in traffic on the way to work, or they are just not having a good day. These can all have a negative effect on productivity. But one of the most distracting issues for employees is financial stress. Unfortunately, many people still live paycheck-to-paycheck. They may be behind on their bills, or struggling to make the mortgage payment. Add to that the uncertainty of whether they will ever be able to retire or not, and you have very distracted and stressed employees. According to a 2013 study conducted by the Employee Benefit Research Institute (EBRI), 6 out of 10 baby boomers feel unprepared for retirement.

These issues can significantly diminish morale and productivity, which, in turn, affects the bottom line. Additionally, if your employees are not adequately prepared for retirement, they tend to work longer resulting in an older employee population that yields dramatically increased healthcare costs.

Annual healthcare costs for a 65-year-old worker can be twice those of an employee between 45 and 54 years of age1. And if older workers are not retiring, it can create a lack of advancement opportunities for the younger population.

So, how do you avoid these issues and make sure your employees are Retirement Ready?

Most importantly you need to make sure that your current advisor is helping you address this need. Unfortunately, many advisors just work with the plan committee and farm everything else out to the record keeper. Most record keepers have great online tools and targeted marketing campaigns to assist with this, but you have to have an advisor that is committed to helping you and your employees bridge the Retirement Readiness gap. Working with a 3(38) Fiduciary is the best way to rest assured that your advisor is providing personalized advice to each employee.

You may not be able to control the traffic jams your employees encounter on the way to the office, but you can absolutely take steps to help them retire with dignity.

1. ”What Employers Lose in the Shift from Defined Benefit to Defined Contribution Plans…And how to get it back”  Prudential Retirement, 2011