As the number of employer-sponsored pensions is continuing to decrease, the responsibility of saving for retirement has been left to employees alone. As a facet of employee retention strategy, many employers wrap “matching” plans or profit sharing programs into their benefits package.
But even with the assistance in saving for retirement, the average American worker is still finding it to be a difficult task. So many people have questions about retirement: “How do I start a retirement account? How much do I need to save?” Adding financial education to your employee retention strategy can help employees answer these tough questions and can help companies avoid the cost of losing an employee.
Where are Americans in Their Financial Planning?
The uncomfortable truth is that 60 percent of Americans say that they find it difficult to save for retirement. The stress and confusion over how to save such a large sum of money is exactly why many employers have included retirement plans in their employee retention strategy. If a worker sees that their employer will assist them in saving up for retirement, they are likely to stick around longer.
Yet, even finding out how much money you have to save can be frustrating. This question simply doesn’t have an easy answer. In 1994, financial planner Bill Bengen proposed a theory called the 4 Percent Rule. Others suggest using a Retirement Calculator. Some propose an ascending scale.
Persons just entering the workforce are being pushed at an earlier age to start saving for retirement – in part because they are expected to live longer than their parents and grandparents. The current average life expectancy in America is 79 years of age, up from about 76 in the year 2000.
Why Good Financial Planning Matters
Many Americans wait until their 30’s or 40’s to start thinking about retirement. It is easy for employees entering the workforce to put off a retirement plan for any number of reasons: they are trying to pay off debt first, their salary is too low to give up any additional income, or they feel that retirement is so far away that saving will not make a difference yet. However, starting a retirement plan halfway to 65 is often too late.
One of the simplest ways for businesses to increase employee retention rates is to match (or double!) retirement contributions. If someone making $40,000 saves 4 percent of his income, he will save $1,600 each year. But with the employer match, the amount doubles to $3,200. The average worker gets used to living without that 4 percent and also feels grateful to his company for investing back in him.
What Resources are Available and How Employers Can Get Involved
There are many resources available to Americans when saving for retirement. Retirement plans come in many forms, such as 403(b)s, 401(k)s, Roth IRAs, and Traditional IRAs. For many Americans, some of these answers can be found on the Internet, but others may prefer to sit down with a person that can answer questions specific to their lives.
This is where employers can get involved. Offering financial education to your employees can be a key addition to your employee retention strategy. Research by the International Foundation of Employee Benefit Plans (IFEBP) found that “four out of five employers find their employees' personal financial issues are somewhat, very or extremely impactful on their job performance.”
Remember: happy workers not only stick with their employers, but they also work harder.
Adding financial education can be an important addition to your employee retention strategy. Saving for retirement can seem a monstrous task for many people. By giving your employees the tools necessary to do so, you will help alleviate their stress and allow them to feel more in control of their financial futures.
Are you leveraging financial education as part of your employee retention strategy? Let us know in the comments below!