A savings crisis is looming in the United States. Almost sixty percent of Americans can’t afford to pay for a $1,000 emergency today and a quarter of the United States is ill-prepared for the future, living without retirement savings.
It’s time for employers to come together to close the savings gap, starting with retirement. Why companies? Because saving starts with your employer. For the majority of Americans, the 401(k) is their first — if not the only — invested asset. In fact, according to AARP, employees are 15 times more likely save for retirement if they can do so through their employer.
Of course, it should start with companies, but why now? The Great Resignation is affecting nearly every industry – add to that an ongoing pandemic – and it’s no wonder 72% of employees say they feel stressed about their finances. As employers look to stay competitive in a labor market, offering a workplace savings program can be a central part of their recruitment and retention strategy.
Traditionally, small businesses have struggled to offer employer-sponsored benefits, primarily due to the exorbitant fees and difficult operational procedures required by older providers. As an entrepreneur myself, I’ve seen how difficult it can be to implement a pension plan without a benefits team in place. Fortunately, the landscape is changing rapidly. New technology platforms are reducing costs for small businesses, and companies like mine aim to offer employers a streamlined and holistic workplace savings platform.
Whether that small business is a tech startup, a hot new restaurant, or another small business, entrepreneurs now have the power to tackle the savings crisis head-on. Providing an accessible retirement plan can help employees save for the future and reduce their own financial stressors, which can directly improve their job performance. Once the best plan for your business has been selected, I encourage small businesses to follow these helpful points to ensure that all employees maximize their benefits.
Make the savings program accessible to everyone.
Currently, approximately half of the American workforce (63 million individuals) do not have access to or participate in an employer-sponsored retirement program. For this reason, it is crucial that retirement plans are made available to all team members, regardless of title or employment status. Plus, small businesses have the opportunity to go the extra mile: talk with employees about savings, discuss retirement planning, and create a culture that values open conversation.
Educate your salaried savers.
Each employee is different, but retirement is of universal interest. Providing educational resources can further show your company’s commitment to its employees. I believe in providing information in an easily digestible format that allows employees to make informed decisions about what works best for their unique goals. Financial advisors are particularly helpful in this area to engage and support your employees.
Plan for success
When setting up a workplace savings program, it’s important to develop a plan that determines what success in your business will look like. Examples include having at least 50% of your employees enrolled in automatic annual raises or having at least 75% of your employees actively contributing to their 401(k). Employer education initiatives will help make these goals achievable.
Understand the impact
It is important for employers to monitor and analyze the results of their workplace savings program. After the program is implemented, ask the following questions:
- How can we iterate to improve this?
- Is the program equally accessible to all employees?
- How can we further help our employees make the best financial decisions based on their individual goals?
Be a gateway for growth
Beyond the 401(k), ask “How else can I support your employee’s financial well-being?” » Nearly 43 million Americans (or 1 in 8 people) have federal student loan debt and almost 20% of Americans couldn’t afford treatment if a medical problem arises. Offering a Health Savings Account (HSA), 529 College Savings Plan, or another form of savings account can help you tailor your offering to the unique needs of your employees. It can also help you differentiate your benefits offering from other companies that offer retirement plans.
The retirement industry is experiencing growing momentum, and small businesses have the opportunity to significantly help their employees while doing their part to ameliorate the savings crisis. With new entrants to the retirement tech space and the rollout of multiple state-run retirement plan options, there’s never been a better time for small businesses to offer their first 401(k). or extend their benefits to other forms of savings.
Aaron Schumm, is the founder and CEO of Vestwell.