As the student loan crisis continues to rise and day-to-day financial challenges become the norm for some, employees are finding it increasingly tougher to save for retirement, or even enroll in a plan. When workers are struggling to even instigate retirement saving, employers can incorporate several tactics to drive motivation and confidence in financial planning.
While the heavy burden of student loans may be heightening debt for Millennials, automatic enrollment gives these new workers an early start in retirement, and their employers are noticing its success.
Lisa Chui, vice president of finance and human resources at Ubiquity Retirement + Savings, explains that the most common reasons why new employees don’t participate in their employer’s retirement plans are:
- They might feel overwhelmed with their current financial situation and obligations;
- The state of “retirement” seems too far in the future to consider a reality;
- A higher priority is placed on paying down student loan debt; and
- Employees newer to the workforce lack extra funds.
“The number one way to get people to save for their retirement and to enroll into their program is to have an auto-enrollment feature, so an employee would have to opt out of the plan,” says Lisa Chui, vice president of finance and human resources at Ubiquity Retirement and Savings. “Even though it’s a small percentage—1% or 2% contribution—most of the time they will let it sit because they won’t see a huge decrease in their paycheck.”
Chui believes that adding automatic increase to each participant’s enrollment is beneficial in cumulating retirement savings as well. If an employee currently contributes 2% of their paycheck to retirement savings and the number automatically surges to 3% in the new year, most employees won’t even notice the difference because of the small amount, she says.
For those employers who do not offer a system-wide auto-enroll, Chui advises that presentation, information and efficiency are key here.
While auto-enrolling participants from the start of employment is advantageous, Chui and Geraldine O’Brien, vice president of communications at Newport Group, suggest utilizing 401(k) matches, which may incentivize an employee to save even more.
“When I go through orientation and even prior to hiring, I’d mention that, ‘Hey, this is going to be free money. You can add that onto your salary, because that’s going to be a percentage over and above,’” says Chui.
O’Brien agrees. “If the employer has a company match—that’s free money,” she says.NEXT: Easy access and education
For newer employees, especially Millennials, the idea of filling out piles and stacks of paperwork may not seem exciting. That’s where having an online presence kicks in, Chui and O’Brien note.
“They want easy access, they want access 24/7, they want it to be simple and fun right?” says Chui. “It’s important for them to have a platform where they can look at their account and make fun changes and just do it in the click of a button, versus having to fill out paperwork.”
Whereas older generations may prefer in-person meetings and physical copies of documents, younger age groups prefer quick access that can be managed anytime.
“You want something that’s easy to read, easy to understand and also is very welcoming as well as educational,” says O’Brien.
Along with auto-enroll, company match and acquiring an online presence, Chui says educating employees about retirement saving and financial wellness is really the core to these solutions.
“Having your HR professional understand the financial importance of saving and for retirement, and to be able to actually speak to the numbers and having that financial sense, really goes a long way,” she says. “It’s one thing to say, ‘yeah it’s really important to save for retirement,’ versus, ‘it’s really important to save for retirement because here is the financial impact.’”
For O’Brien, the most important tool in encouraging employees to participate is personalization and continuity. “What’s equally important is knowing your audience and its’ different strokes for different folks,” says she says. “And that’s where your human resources professional comes in because they know their employees best, and they know the best way to connect with their employees.”
Each employee’s financial plan should be catered to fit each participants’ needs and can offer support at every life event (such as college graduation, marriage, or child expectancy) in the future. With the use of a provider, O’Brien believes these plans can be customized to serve every type of worker.“Come up with recommendations that are going to work for that particular employee because one size does not fit all,” she says. “Continue to communicate with the employee and participants throughout their work life, so then you’re keeping them engaged and then reinforcing the benefits of participating in the plan.”