Participating in your first retirement savings plan can seem overwhelming and may stir up a whirlwind of questions. Remember—even though getting started can be difficult—you are taking an important step for the Future You: investing in yourself!
As you navigate your company’s retirement benefits, talking with your Human Resources (HR) department is the best place to start.
For some insight on how your HR department can help you get your savings plan in gear, we sat down with Lisa Chui, VP of Finance + HR here at Ubiquity Retirement + Savings.
AR: Does being overwhelmed prevent individuals from enrolling in retirement plans? Why or why not? Are there any other reasons why people don’t enroll?
LC: I don’t think it’s necessarily that employees feel overwhelmed with choices, but rather, depending on their age, the feel overwhelmed with their financial situation and obligations. Employees just now entering the workforce have always heard they need to save for retirement. But because that date is so far in the future, many don’t feel it’s the proper savings vehicle, especially when they may have student loans to pay off, for example.
It’s hard to conceptualize an event that is 30 to 40 years in the future. For people in the middle of their careers, it’s almost a no-brainer that you must establish retirement savings. But depending on your financial situation, saving any amount from your paycheck could be difficult. Still, most people who are Gen X and Y know they need to open a 401(k) sooner rather than later. Probably the biggest reason for not enrolling is the lack of extra funds. If someone is living paycheck to paycheck, there isn’t much to save.
AR: What’s the best way for employees to learn their options for retirement savings vehicles at their company?
LC: The best way would be to ask their HR department, or if they are at a small business, to approach the owner or person responsible for payroll and benefits. At companies with dedicated HR departments, it’s important to continually remind employees of this benefit. Having a benefits fair is often a good way to educate and publicize the options available to employees. If an employee learns there isn’t a retirement plan available, I would encourage them to educate their HR department or company owner on how these plans benefit the company. Retirement plans attract and retain talent, and the associated tax savings almost entirely cover any additional costs.
AR: If an employee is new to a company, how should they approach HR to inquire about retirement benefits?
LC: A good HR practice is always to have information on benefits available to employees and to go over this at orientation or new hire meeting. A lot of established companies have defined new hire orientations and a section on benefits is part of that.
However, even at a smaller firm, you still have an onboarding meeting where you have to complete administrative paperwork. If an employee doesn’t notice any information on retirement when completing this new hire paperwork, that would be the time to ask.
AR: If an employee is not currently enrolled in a retirement savings plan, how can they get started?
LC: First, look at your paycheck and current financial obligations to determine what percentage of your income you can save. Then, speak to your plan sponsor and find out when you can start contributing. It’s important to remember that it’s not a direct calculation where if you decide to save $200 per paycheck your net check is automatically $200 less. With the tax benefit, you are getting taxed less, so your net paycheck might only be $150 less.
AR: Why are company match programs especially important when choosing an employer?
LC: Two words: FREE MONEY! That match is so important because it’s literally free money that is going into your savings vehicle. At a minimum, you should always contribute as much as your company will match, otherwise you are leaving cash on the table.