Posted on May 18, 2022

A 33-year-old single mother, Karina paid little attention to her employer’s notices about the company’s 401(k) retirement plan. Retirement seemed like a lifetime away, something she wouldn’t have to worry about for years. Plus, her immediate concerns revolved around everyday bills. Her mortgage, daycare expenses, utilities, groceries, and student loans ate up a big portion of her paychecks, and while she managed to sock money away in her savings account each month, there wasn’t a lot left over, especially with inflation so out of control. Save for retirement? That was low on the priority list…in fact, it wasn’t even on her priority list, until the day her boss gave her a little nudge.

“You know, you’re leaving free money on the table,” her boss said, when Karina once again declined to sign up for automatic contributions. “Not only does the company do a 50% match of what you contribute, your contributions can reduce your taxable income and your investments gains aren’t taxed until you retire and withdraw them. You’d be surprised about 2 things: how much your contributions can grow over time, and how quickly retirement comes!”

In fact, the Bureau of Labor Statistics states that as of March 2021, while 68 percent of private industry workers had access to their employer’s retirement benefits, only 51 percent chose to participate. How can you best communicate to employees the advantages of participating in your company plan, and the importance of saving enough for a comfortable retirement? Here are some methods:

  • Build an awareness campaign that shows employees how plan participation will benefit them and their families – now and in the future. Provide plan information on your company website and internal newsletter, and hold an employee meeting once a year or more often to review the plan and answer questions. If possible, offer individual employee meetings with the individual, team, or vendor responsible for plan administration.
  • Make it easy for employees to take action by signing up for automatic payroll deductions.
  • Make your messaging simple and easy to understand. Avoid jargon and don’t make retirement planning appear too complex.
  • Tailor messaging to the different life stages of your employees. For example, clearly show the power of compounding to help Millennials realize how even small contributions add up over time. Emphasize the benefit of catch-up contributions for older workers.
  • Encourage employees to consider increasing their deferrals upon getting a bonus or salary increase.

A positive, consistent, and easy-to-understand communication plan is key to motivating employees to participate in your retirement plan. It’s also important to keep the lines of communication open and be available for questions. You might also consider working with your plan administrator to offer financial literacy resources for employees.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.

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