Retirement security isn’t a guarantee anymore. How employers can help

Improving one’s financial well-being is often a tried and true New Year’s resolution, and while climbing out of debt, saving a little more, and getting a handle on any and all outstanding bills are admirable goals, there is one area of ​​financial planning that tends to be thought about last: retirement planning.

When your current financial situation is somewhat precarious, saving for a time when you won’t be working can seem like it shouldn’t be a priority, says Mark Williams, CEO of Brokers International, an insurance marketing company. This is where employers can step in and help employees reach the finish line.

“The first thing that employers can do is provide financial education,” Williams says. “Providing a very good understanding of the benefits in which that company offers is key.”

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And getting that education now can help reverse a lack of savings for many: one quarter of employees don’t have any retirement savings, according to PwC research, and only 36% say they feel their retirement planning is on track.

But even those employees who are actively saving for retirement may not be doing enough. PwC estimates that a median retirement savings account of $120,000 for those approaching retirement will likely provide less than $1,000 per month over a 15-year retirement span. To help pad those accounts, Williams recently connected with Employee Benefit News to discuss how employers can offer support and what employees need to do to take control of their financial future.

How have employers been stepping up to help employees reach a financially secure retirement?
We have seen a trend of employers expanding the financial solutions that they offer employees — that might include a 401(k), medical spending accounts, and flexible spending accounts. Many employers are offering special savings vehicles or savings accounts to employees, like a money market account.

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Employers should start with an expanded offering to employees and then follow that up with greater education. We’re seeing major corporations offering educational classes free of charge, on company time. They’ll bring in a financial expert, usually one that’s tied to some of their benefit plans. So if they offer a Fidelity 401(k), they might offer classes from a Fidelity representative. Those educational classes are really designed to help people understand what options they have to choose from their benefits. But the easiest way for an employer to help an employee is to provide some sort of 401(k) match.

Just 41% of employers offer a 401(k) match between 0% and 6%, according to the Bureau of Labor Statistics. Why might some employers be hesitant to provide this?
Well, it is an expense to the company. Every type of financial vehicle has some sort of administration fee. The employer is paying someone to administer that benefit. A match is money that’s given to the employee, it’s part of payroll, and it’s expensive. So for some employers, it’s an expense and a benefit that they’re not willing to offer. As an alternative, some employers will make the choice not to offer these benefits and instead pay employees a little bit more and make it their responsibility to set up retirement accounts like an IRA or a Roth IRA.

We’ve spoken a lot about what employers can do, but what steps can employees take on their own to better enhance their future financial well-being?
There’s a bunch of things. First, let’s talk at work. It’s critical to take advantage of a match in any type of retirement account. It’s free money, and what a lot of people don’t understand is if you contribute to your 401(k), that money comes out of your taxable income that given year, so it does reduce your tax liability. So for example, if you make $40,000 a year, and put $2,000 away, you’re only taxed on that $38,000.

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The other thing is to take advantage of medical spending accounts. Employees can choose the dollar amount up to $2,750 a year, and then use their pre-tax dollars to pay for things that they would normally pay with after-tax dollars. That’s a huge benefit when it comes to co-pays, dental visits and eyeglasses. There are lots of ways that employees can buy needed items on a pre-tax basis. Employees need to make sure they’re taking advantage of every taxable option or pre-tax option that the employer offers.

The other thing employees can do, and it is going to sound really goofy, is stay healthy.

Why do you say that?
People that are out of work due to health reasons do cost companies money. As an employer, obviously I want all my employees to be healthy and happy. But from a financial perspective, it costs me money when employees are ill. Number one, I’m paying for work that’s not getting done. And, there’s an extra burden on employees that are in the office who are having to do the work of a sick employee.

How do you as an employer look after the financial and physical health of your employees?
One of the things that we did at our company is we now have flex schedules. We were full time in the office pre-pandemic. Now we offer people several days at home and several days in the office every week. And many of the jobs that we have now, depending on the position, are full-time remote. That’s a huge advantage, even if you just look at commuting costs for some people, especially if they’re in a city and ride a bus every day and it’s two or three dollars each way. Well, now they have the ability to save $6 a day and I’ll tell you what, times 22 days a month, that’s quite a bit of money people are saving. So there are some things like that, which are definitely pandemic driven.

We also offer fresh fruit at our office instead of junk food. People tend not to buy fresh fruit, but if I have it to offer, they’ll eat it. We also offer ergonomic furniture and whole BOSU balls rather than chairs. Promoting health and wellness, and offering financial subsides for health and wellness goes a very long way in supporting employees’ peace of mind, workplace culture, and results in overall healthy employees.


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