Many employers may be weighing the pros and cons of establishing a retirement. It’s often cited as a recruitment tool, but do employees really care about potential retirement benefits? According to professional services company Towers Watson, the answer is “yes.” Towers Watson’s 2013/2014 Global Benefits Survey asked 5,070 U.S.
The “Great Recession” that began in 2008 left its mark on many people, affecting home values, bank balances, retirement accounts, and more. It also affected people emotionally, with some 64% of workers reporting that money is a very or somewhat significant source of stress, according to the American Psychological Association (APA).
Eighty-five percent of employees report feeling at least some financial stress, according to a survey released by Financial Finesse, a financial education firm. The survey, conducted in 2014, noted that almost one-quarter (23 percent) of employees felt “high or overwhelming” financial stress.
Getting employees to participate in a retirement program like a 401(k) is always a concern for plan sponsors. They wonder how best to communicate the plan’s benefits to employees and encourage them to enroll. As it turns out, there’s a significant amount of research on the best ways to communicate with employees about retirement plans.
One of the biggest boons to enrolling participants in a qualified retirement plan has been automatic enrollment. Rather than choosing to participate, employees are automatically enrolled in the plan and must opt out if they don’t want to participate.
Younger workers are typically more reluctant to participate in qualified plans. Retirement is far away for them, salaries are lower, and they may be struggling with bills, like rent or student loan payments. A psychological theory called Construal Level Theory (CLT) suggests that the more removed an event is from our personal experience, the more abstract it is for us.
Financial wellness is becoming increasingly important to plan sponsors. Financial problems decrease employees’ productivity, increase their absenteeism, and even affect their health. According to a report issued by the Consumer Financial Protection Bureau in August 2014, 7 out of 10 American workers say that financial stress is their greatest cause of stress.
The team at The Participant EffectSM knows that a lot of people think retirement plans can be complex and often confusing. However, as individuals assume more and more responsibility for planning for their own retirements, it’s important that you understand some of the terminology you’ll encounter:
A basic principle of investing is the efficient markets hypothesis, which states that investors are rational and will make logical investment decisions that aren’t based on emotion. If that is true, however, how can we explain market crashes, like the financial crisis in 2008, or the market crash in 1987, or even the crash in 1929?
Helping your plan participants understand the importance of retirement planning and how they can best accumulate assets is one of the primary responsibilities of plan sponsors. While plan participants don’t need to know every aspect of portfolio management theory, there are a few key concepts that every participant should understand:
Perhaps you’ve lost a job, faced an illness or have been delt a family crisis that emptied out your emergency fund. What are your next steps?
You’re eyeing center-hall colonials in your neighborhood and dreaming about the garden you want to plant in the backyard and all the holiday celebrations you’ll host. You’ve saved toward this goal and think you’re ready to pull the trigger. But the real question is: How much house can I afford?
Or is it?
Social Security’s financial cliff is coming closer into view. Experts project that the fund that pays for government retirement benefits through FICA taxes will be depleted within the next 15 years.
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