Having a retirement plan in place is a great way for your business to attract and retain talent while allowing your employees to save for the future, while paying less to the IRS.
However, there are a lot of misconceptions about retirement plans that may keep employees from enrolling. Here are some ways to help businesses navigate these often jargon-heavy waters.
1) Automatically enroll employees
I regularly encounter business owners that want their employees to save, yet see a low adoption rate. As the saying goes, “You can lead a horse to water, but you can’t make it drink.” Offering a retirement plan is not always enough to get people saving. However, if you automatically enroll your employees in a plan, you are empowering them and removing barriers to entry.
The Employee Benefit Research Institute published its 2015 retirement confidence survey (PDF), which offered some enlightening statistics. When an employer automatically enrolled employees in a retirement plan, deferring 3 percent or 6 percent of their salary, at 3 percent, 50 percent reported they would raise their contribution while 39 percent would remain at 3 percent. Just 4 percent would reduce the contribution or stop the contribution altogether. At a 6 percent deferral rate, three in 10 would raise the contribution and 44 percent would continue the contribution. Astoundingly, only two in 10 would reduce the contribution and only 3 percent would stop it altogether. That’s a strong argument in favor of automatic enrollment, to say the least.
2) Consider a match
Even a small amount of a match encourages employees to save. Free money for your employees also means a greater tax savings for you. The major bonus in the employer match is attracting and retaining talent. According to 401khelpcenter.com, the average company provides 2.7 percent of pay, with the most common type being a fixed match. A match is basically a free raise that goes toward your employees’ future and is an easy sell, benefiting everyone.
3) Remove the scary from the conversation
There is a significant distrust of Wall Street these days and with good reason. The collapse of the market that threw us into a recession is still fresh in the minds of most people.
However, saving rates for millennials are higher than any other generation, which is counter to what one would think, when confidence continues to be at an all-time low. The good news is that the Financial Technology (FinTech) revolution is emerging in a significant way, offering transparent online saving vehicles that lack the stiff jargon that used to be present with big banks and financial institutions across the board.
Whomever you choose as a provider, it’s important to ask questions to ensure you are making the best decision for your business, while also ensuring that you and your employees are retaining the majority of your hard-earned and compounding dollars. Make sure you are in a “fine-print-free-zone”. Providers that are worthy of your money will offer you and your employees exceptional tools and information to ensure you are making sound decisions for your future. In today’s FinTech world, you and your employees should experience retirement savings as simple as point, click, save – no paper, no fuss, no jargon.
Establishing a retirement plan in the workplace doesn’t have to and should not break the bank. Make sure you do your homework and ask the hard questions. Increasing participation and getting the free tools to do so should be included in any plan you engage with.