Employees need financial help when it comes to
Americans have a murky understanding of how to plan for retirement and don’t want to spend much time clearing it up: a study by Value Penguin found that 63% of Americans are confused about what a 401(k) plan is. A separate survey by TIAA found that Americans spend more time planning where they’ll eat out for special occasions or researching information around purchasing electronic devices than they do choosing investments for their IRA accounts.
While employers want to help their workers demystify their financial lives, almost 40% of people are seeking out retirement and financial advice through their social media networks. How can employers cut through the noise and help their employees prioritize their financial picture today, and
“At some point, somewhere along the way, we got this idea that once I reach a million bucks, I can retire and I can live whatever life I want,” says Keith Huber, retirement plan advisor at OneDigital, an HR advisory firm. “The viewer wants instant gratification: tell me in 30 seconds how I’m going to be a millionaire.”
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Instead of a pie-in-the-sky number, Huber says individuals need to look at what they’re spending now, and what they want to spend in the future. While these conversations don’t have to take a long time, they do require long-term thinking.
“When we're doing a financial plan for someone, the hardest question I ask is, do you have a good idea of where your money is going, because without that number, we can’t figure out how much you’ll need,” he says.
Yet social media can obscure that picture with “get rich quick” schemes that make long-term savings look effortless, Huber says.
“The average Tik-toker isn’t trying to make the world of finance a better place,” he says. “It’s really just marketing, and sometimes that’s perfectly fine, but other times, they won’t talk about the math of how contributing $50 a month turns into a million dollars.”
Employers need to work harder to provide financial education and coaching to employees, so they’re actively saving and finding qualified information that will help them reach their end goal, Huber says.
“It's of course important to have the 401(k) available to folks, but not educating your employees about the benefits that are available is the biggest mistake that a lot of employers make,” he says. “Inertia sets in when it comes to benefits, and you can’t just think about your benefits once during open enrollment.”
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Instead, employers should be continuously offering education and communication around their retirement options, and provide resources beyond basic savings plans. Things like student loan repayment services or debt programs can help employees juggle their financial responsibilities in tandem, while guiding employers on what benefits and support are most useful.
“I think it's really important to know your employee base,” Huber says. “Do you have an older workforce who's going to be thinking about retirement and probably has a lot of questions about social security and Medicare, or a younger workforce, who's trying to balance paying off student debt with saving for their retirement plan. Get a better idea of where the average employee is and what's important to them.”
Employers can also tap into a third-party fiduciary firm to help guide employees through these financial decisions, so they’re not left scrounging for information online. Huber says partnering with a trusted advisory is a great way to help younger employees in particular get their financial lives in order.
“It's just so important to get that unbiased, independent advice where that individual has nothing to gain, whether or not you follow it,” Huber says. “Knowing that it’s been vetted by the employer and that the advice is in your best interest, and it’s not just coming from scrolling or headline grabbing.”
