Retirement benefits for employees have almost always been a staple of the American workplace. Along with access to health care benefits, retirement savings plans give employees a choice of how they wish to retire—and where they invest their hard-earned dollars.
These days, more employees are prioritizing retirement planning than ever before. If your organization is looking to offer generous retirement benefits, here’s what you and your colleagues need to know about these plans (and the financial education that should accompany them).
Retirement Benefits Are Increasing in Value
A survey of 5,000 U.S. employees conducted by Willis Towers Watson reveals that 66 percent of respondents are “willing to sacrifice more of their paycheck for greater employer-provided retirement benefits.” In comparison, only 38 percent said they are willing to take a pay cut for better health care benefits.
Steve Nyce, senior economist for Willis Towers Watson notes that, “Employees continue to feel vulnerable about their long-term financial prospects and are willing to pay more for greater retirement security.” In addition, it was found that employees are becoming increasingly interested in access to more flexible benefits that adapt to their life needs, including more financial management support.
Many small business workers tend to worry about this because there may be only one available option when it comes to retirement benefits for employees. A simple IRA or SEP account may be all that they have access to—with a small percentage of contributions added by the employer. Individuals who are getting nearer to retirement age may decide to move on to a bigger company that offers a more generous employee retirement savings plan, so they can reach their financial goals sooner.
Boosting Retirement Benefits Can Help Meet Employees’ Needs
The answer is not simply throwing more money at employees. The best solution is giving workers the tools and support they need to make smart decisions with their retirement savings.
The International Foundation of Employee Benefit Plans published a survey that highlights the biggest concerns of employees in the U.S. and Canada. The study found that just 45 percent of organizations offer retirement security education. By offering your coworkers valuable financial education, you can enhance their ability to manage money well and make strategic decisions concerning retirement—all while improving productivity and engagement levels.
It’s also critical to understand where individual employees are in their retirement planning. Those who are in their later years will be focusing on adding more funds to retirement savings plans and being more aggressive with investments to build capital. Younger workers might not be thinking about retirement, but may need more help with financial literacy and avoiding too much debt.
How to Get Creative as a Small Business
A small business can provide retirement savings support in a variety of ways. One method is to bring in a financial counselor once a year to talk about retirement planning. This can happen during new-hire onboarding, when employees are most likely to sign up for the company-sponsored retirement plan.
Another option is to offer employees the chance to roll profit-sharing, bonuses, commissions and other financial rewards into a tax-free retirement fund. Small businesses can also open up a SEP and start contributing to a plan on behalf of employees, which can be a great way to get them thinking about preparing for retirement.
Remember, to help your fellow employees make the most of their retirement benefits, financial education must come first.