Employees have a lot of obstacles to face on their way to retirement, but Schwab's new partnership is aiming to keep employees focused on making a plan to tackle whatever stands in their way.
To help employees
"One of the key questions that individuals are trying to solve is, 'Am I better off paying my student loans a bit quicker?' and how can they navigate those decisions," says Adrian Miguel, director of advice at Schwab Retirement Plan Services. "This service is a great opportunity for us to educate individuals about what their options might be, whether it's paying down that debt quicker, looking at their budget so that they can afford their payments, and helping people have a more secure future for retirement."
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Seventy-nine percent of employees say student debt is preventing them from saving adequately for retirement, according to a study by Fidelity. Eighteen percent said they contributed nothing to their 401(k), while 22% of those with loans were only able to dedicate 1.5% of their salary to retirement savings. Common advice recommends employees save 10% of their income into a retirement fund.
For those who have benefited from COVID-era loan pauses, the time to make a sound financial plan is more pertinent than ever, as payments on federal student loans will resume in October. That looming date can lead to overwhelm without the right education and strategy, Miguel says.
"We know if people aren't sure what the right decision is, they don't take any action. It's just about having that discussion, talking through their concerns and talking through what options they have, so we can best educate them," he says. "Ultimately, we want to help them take positive action and positive steps towards what changes they can make to really set them up for success."
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Through Vault, Schwab's 401(k) plan participants have access to a financial wellness hub where they can upload their loan amount and access various modeling tools to see their savings and debt repayment options. Finding the best option for them can spur employees into action on not just their future savings' strategy, but their financial confidence overall.
"When [employees] have a plan in place, they have more confidence, they feel more financially secure, they have less debt, they have an emergency fund — there's a lot of really healthy behaviors," Miguel says. "At the end of the day, we want people to be confident and to feel empowered with their finances. Having a plan is really key, and really helps drive the right outcomes."
While a benefits partnership helps facilitate these actions, Miguel says employers need to make financial wellness a core part of their culture. Incentivizing good financial behaviors can also get employees focused on their financial goals.
"Encourage staff and HR partners to use the tools, engage with digital planning options and be an advocate to encourage employees to leverage those services," Miguel says. "All of the actions employers take really amplify engagement, while getting employees the help they need."
