Only 56% of American workers participate in their workplace retirement plan, according to the Pension Rights Center. Meanwhile, our recent
Depending on the study, 61% to 78% of Americans are
We live in a world of instant gratification, and retirement is far from instant. Saving must span decades, and employees face a variety of life changes including health, income and family. There are several biases that stop us from planning for the future. Present bias (hyperbolic discounting) means our brains are wired up for immediate rewards over larger, delayed rewards. Coupled with procrastination, it is hard to overcome our psychological limitations and save for our financial future.
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Most of us received physical health education in school, but few of us received financial health education. As a result, it takes trust in one's employer, confidence, patience and some understanding to allow hard-earned money to be taken out of every paycheck and placed in investments. Without financial knowledge, the workforce will not understand the power of compounding interest, an employer match, tax deferral, risk vs. return, asset allocation and long-term investment returns.
Employers are in a powerful position to boost the financial health of their workforces with the help of benefit advisers who can help seed a more meaningful strategy. Furthermore, a financially healthy workforce will be more productive, loyal, engaged, retire when they want and have reduced healthcare costs. There is a big difference between a senior employee who wants to keep working because he or she loves his or her job vs. a senior employee who keeps working because of financial necessity. Most of us want to retire one day, but we require the financial means and understanding to retire confidently.
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In addition to auto-enrollment, auto-escalation and embracing provisions in Secure Act 2.0, what else can employee benefit professionals do? Here are a few tips to engage employees in long-term saving:
- Start with unbiased, relevant benefit and financial education: Build the financial knowledge, skills and confidence the workforce needs with education. Empower them to make informed decisions about their short and long-term financial health. Help employees understand how pay, benefits and retirement plans all support their financial health.
- Remove industry jargon: Simplify language, provide clear definitions, showcase examples of similar employees, break down complex concepts, use storytelling, interactive content and avoid industry jargon.
- Include diverse language and imagery: Offering multiple languages and diverse imagery is inclusive and breaks stigmas around investing and savings. Furthermore, language and imagery allows the retirement plan to be more approachable for the entire workforce.
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- Engage ERGs: Several employers consider their Employee Resource Groups "the vocal minority" of their organization. ERGs are powerful in driving engagement in benefits. Education must be ERG specific and empower members to become financial health champions for their communities. Naturally we are more inclined to take advice from people like ourselves.
- More impact - less comms: Simple, creative, targeted and data-driven campaigns are effective. In a world of overcommunication, be creative to breakthrough.
- Establish a "benefits ecosystem": Encourage partnership among various benefit vendors so they can refer the workforce to each other. Establish a baseline financial wellbeing hub that provides diverse financial education while seamlessly integrating workplace benefits like a retirement plan.
