As the student loan crisis intensifies and day-to-day financial challenges remain the norm for many, employees are finding it increasingly tough to save for retirement, or even enroll in a retirement plan.
In such a challenging environment, employers can play an outsized role in improving financial health by incorporating several tactics to drive motivation and confidence in financial planning.
“What is most important is knowing your audience, and it’s ‘different strokes for different folks,’” says Geraldine O’Brien, vice president of communications at Newport Group. “This is a job for your human resources professionals because they know their employees best, and they know the best way to connect with their employees.”
While the heavy burden of student loans may be heightening debt for Millennials, causing some to avoid saving for retirement, automatic enrollment gives a helpful nudge to this group. O’Brien observes that many Millennials, once auto-enrolled, find they can actually afford to put at least a little away for retirement while also reducing student debt.
“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,” agrees Lisa Chui, vice president of finance and human resources at Ubiquity Retirement and Savings. “Even though it’s a small percentage, one percent, two percent 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 deferral increases to each participant’s enrollment is beneficial in accumulating retirement savings as well. If an employee currently contributes 2% of their paycheck to retirement savings and the number automatically bumps up to 3% in the new year, most employees won’t even notice the difference because of the small amount, Chui says.
For those employers who do not offer a system-wide auto-enroll, Chui advises that presentation, information and efficiency are key here.
“You can always just have it be sort of a manual auto rollout, just have the HR person present it as something that you just need to do,” she says. “They must focus on making it easy and making sure there are no barriers to enrollment.”
NEXT: Match remains a powerful incentive
Chui and O’Brien suggest utilizing at least a modest 401(k) match; it may just be a percentage or two, but the effect is still powerful when it comes to further incentivizing an employee to save.
“The message will go something like this. ‘You know, this 401(k) match is essentially free money that you can’t afford to leave on the table. 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 and it goes a long way to get people saving,” she says.
For newer employees, especially Millennials, the idea of filling out piles and stacks of paperwork may seem daunting. That’s where having an online presence helps a lot, 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 fast 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 which 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 on 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, where each plan is 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 the right 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 concludes. “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.”