Financial Wellness: Planning for Retirement
Quick Retirement Facts:
- Most people consider the standard retirement age to be 65 years old, in 2021 the average age of retirement was 62.
- Many Americans have little to no retirement savings.
- Social Security benefits are only intended to replace 40% of income from when employees were working.
Funding retirement is something many employees put off planning for, and consequently this costs them in the long run. Too often employees are uneducated about the many ways they can begin their savings with minimal cost to themselves or how beneficial this will be come time for their retirement. Finding the path to a secure retirement will be easier with your help, here are a few steps to consider when promoting your team’s saving habits:
Discussing the Reality of Retirement Needs
Discussing with employees the realistic expectations that come with planning a retirement is the first step toward encouraging savings, the main idea being that retirement is expensive. In order to maintain their standard of living, employees need to save up about $1 million by the time they are ready to stop working. While this may seem like an unrealistic number, with strategic contribution plan structuring and oftentimes employer matching, this expectation can be met and even exceeded.
Helping Employees Take Full Advantage of Plans
With the decline of benefit pension plans, employers and their teams must take a more hands-on approach to planning with contribution plans such as 401(k)’s and automatic enrollments. Making sure to do periodic reviews of employee plans, monitoring who isn’t enrolled, and reminding employees of the importance in getting ahead of retirement saving will increase investment in their futures. Although many employees may lack the motivation to make these decisions a priority, with your help they won’t miss the opportunity to fund their futures.
Continuous communication about plans will draw attention to the principle idea that this type of saving is necessary in order to maintain any standard of living. While this could be something as simple as a reminder email every few months, it’s also helpful to keep in mind that categorizing such communication based on age may be more effective. An example of this could be the appeal of long-term saving to younger employees just starting out versus how to leverage assets for older and higher-paid employees. The overarching message should always remain the same however: the more planning and saving done for retirement, the better.
Other Factors Affecting Retirement Readiness
In addition to being properly enrolled in the right plan, there are a number of other factors that may affect employee retirement including proper goal setting, investment decisions, and frequent monitoring of fund progress. Without specific goals in mind to reach long-term, saving may seem redundant. Choosing a set amount to put away based on current savings, age, and income will keep planning on track, with adjustments made along the way to actively keep on track.
While retirement planning is necessary from an employee perspective, it’s also crucial to organizations in terms of their human capital quality. Having motivated employees affects every company’s overall performance, in other words: employees who want employment with your organization rather than need it due to lack of savings will affect your bottom line and company culture.
If you’d like to learn more about retirement planning or Exude’s FRS retirement advisors, contact us today!