Plan Sponsor Tips: Inspiring Employees of All Ages
Whether employer or employee, financial troubles are a universal constant, giving us stress and hampering our ability to save for the future. As an employer, you have the power and responsibility to help your employees face such difficulties through the employee benefit package you provide.
While many financial wellness programs offer a “one size fits all” solution, it’s important to be mindful that different age groups have different needs, and it’s very likely your workforce represents a fairly wide generational cross-section. Here we’re going to break down the age range of your employees into four 10-year slices to examine the needs, hurdles and expectations of each. (Note that these groups are not absolute – different employees have different financial situations – but these categories can help you address common life milestones.)
First we start with your youngest employees, the issues they face (and how to deal with them), and how you can motivate them to save for the future. These employees are often just entering the workforce and may carry a substantial amount of debt, but generally lack obligations such as family or mortgage payments which tie down older employees.
Not everyone thinks first and foremost about saving for the future: their immediate financial obstacles are a greater concern. For millennials, this means student debt. You can help them tackle these obstacles with the help of financial tech companies like Student Loan Genius and SoFi that aim to reduce financial stress, helping you recruit and retain top millennial talent in the process.
For these younger employees, time itself is one of their greatest assets: if you can get them to start saving in their twenties or early thirties, compound interest can help them create a sizable retirement nest egg. To this end, there are two approaches you can consider. One is adding automatic enrollment to encourage positive saving behavior by default; according to a study by JP Morgan, participants under 30 readily embrace automatic features. Another is to include SRI (Socially Responsible Investing) options. The aforementioned study also indicated that 84% of millennial investors are interested in SRI, which is little surprise as many millennial employees wish to make a positive impact on the world and tend to feel more connected with a workplace that shares in that mission.
This stage of life comes with a fair share of major events: promotions, weddings, houses, starting a family, etc. The chart below shows a few milestones and the average price tag which accompanies them:
It’s not uncommon for your employees to find themselves in a fair amount of debt at this stage. 80% of Americans are in debt to at least some degree, with no clear way out. As of December 2016, total household debt in the US exceeded $12.5 trillion.
This is a prime opportunity for plan sponsors to incorporate financial wellness programs such as SmartDollar, Pete the Planner, or Double Net Pay that address debt management. A comprehensive program needs to help employees deal with their current financial hurdles, motivate and educate them towards retirement, and lay out a clear and actionable path to save for the future.
This might be a good opportunity to assess and possibly increase your plan’s default savings rate in order to help boost contributions. Another option is conducting a one-time (or annual) enrollment of all eligible employees into the plan, including those that may have opted out previously. This practice is called “backsweeping,” and has been criticized as too paternalistic, but has provided positive results to companies that have implemented it.
Additionally, assess your advisor relationship, does your current advisor spend one-on-one time with employees and provide detailed wealth management strategies? During this stage, finances get real; you know what they say, “mo money, mo problems.” Your employees may benefit from a more personal and specialized approach.
The “sandwich generation” is often torn financially between their children, their parents, and themselves. Your midlife employees may be tempted to crack open the piggy bank and delve into the money they’ve saved in their retirement accounts, but you may want to think carefully about offering 401(k) loans. If you decide to allow your employees to borrow against their nest eggs, you’ll want to review and update your loan vetting process in order to avoid future HR headaches. The financial ramifications of these kinds of loans vary, ranging from increased taxes to extended employment in order to repay borrowed funds. One obvious way to avoid the potential issues associated with 401(k) loans is to amend your plan and not allow them in the first place.
Although most workers age 50 and up should have a healthy nest egg, it turns out that 36% (nearly 2 out of 5) have less than $25,000 in savings and investments. Even optimistically assuming the mean retirement account balance of $144,000, the chart below shows how that sum amortized over 18 years comes out to only $8,000 per year, giving a budget of just over $600 a month.  According to the Bureau of Labor Statistics, retirement expenditures exceed that amount to the tune of $32,000 per year!
This is a harsh reality to present to your older employees that have been saving diligently, but it’s even more sobering for those who have only a little money tucked away. You need to have serious conversations about retirement with your employees and help them understand what kind of future they’re saving for.
With your hand on the wheel of your employees’ retirement plan, you have the perfect opportunity to help them save for the future. With the specific demographics of your company as your guide, you can build a financial wellness program that can inspire employees of all ages to pursue their retirement dreams, making your company all the more attractive to the best and brightest talent.
Financial Management Network works closely with employers to assist in educating their employees and help to generate a culture that is engaged. For more information on dynamic programs that strive to impact financial wellness and retirement readiness, contact us today!
 Pew Charitable Trusts. “The Complex Story of American Debt.” July 2015.
 FRBNY Consumer Credit Panel. “Quarterly Report on Household Debt and Credit.” February 2017.