Chuck Yanikoski, President, RetirementWorks, Inc. has published 42 free, monthly Retirement Readiness reports. They are all well written and can be found at: http://www.retirementworks2.com/support.asp?id=newsletter. Chuck has, gratefully, given me permission to use material from his reports to supplement information in my blog. I have done so below using Chuck’s report number 42:
The economy has stabilized, many companies are making profits, and employers are once again making contributions to 401(k) and other plans. Employees and employers will both benefit by offering a solid retirement readiness program for all employees, but especially older employees.
Why will employees benefit?
Employees getting ready to retire mostly do not know how to do it. Retirement is complicated, involving a host of decisions and concerns both financial and non-financial. Retirement is about a lot more than losing one’s regular source of income. It’s about a whole new style of life. There are issues such as one’s self-concept, one’s family and friendships, one’s opportunities to do all of this occurs within the context of aging, and the approaching specter of death – one’s own, and that of one’s spouse/partner, siblings, close friends, and beloved elders. That is to say, in a context of ongoing and looming loss.
Employees are not well equipped to deal with any of this. Sending employees out into retirement without help is like throwing a little kid into a pool – with weights attached. If the kid happens to be in the shallow end and can struggle to her feet, it‘s still awkward at best, but she’ll be fine. But if she’s in the deep end, it could get ugly.
When it comes to retirement, most employees are in the deep end of the pool. Sure, they’re adults, and they’ll figure out some of it before it’s too late. And when they do figure it out, it is likely to be the hard way – and sometimes too late.
Why will employers benefit?
Here is an example: An organization with 100 employees who make $50,000 a year each pays nearly $400,000 a year just in FICA contributions, for Social Security and Medicare for its employees’ retirement. If they also contribute 2% of salary into some kind of pension plan, the total cash contribution to their employees’ retirement security is close to half a million dollars, every year.
This is an enormous investment in the future welfare of their employees. Doesn’t it make sense to spend a little more to make sure that this investment is not squandered when employees unprepared for retirement make uninformed decisions that they then cannot make up for?
Organizations that offer employee benefits recognize that all such programs have other important advantages for the employer, in terms of hiring, retention, and employee satisfaction and commitment. Retirement benefits also facilitate the voluntary retirement of employees to make room for promotions and new employees. A retirement readiness program is a way of maximizing the value of the Social Security and other retirement benefits that are already being paid for.
Paying for retirement benefits in order to provide a secure old age for employees, and then not helping them make the decisions that enable them to make the most of their retirement, is like buying them an incredibly expensive and delicate retirement gift without telling them how to use it or take care of it.
Ironically, a lot of employers now provide free or subsidized advice to senior executives. There’s nothing wrong with that, but few of those executives need it or are actually in danger of ever running out of money.
The rank and file employees and the mid-level managers often are very much in such danger. Even if they have enough to cover their living expenses indefinitely (and most do not), they are still at risk if they or someone in their family runs into an unforeseen problem
So, here are a few cost effective ways retirement readiness advice to your employees:
• Have a staff leader run meetings with printed and automated tools that provide education and advice about retirement.
• Let employees meet on company time without a staff leader, and run their own group (there are also tools out there that facilitate that approach).
• If this isn’t possible, encourage them do it on their own time.
The retirement investment you are making shouldn’t be wasted. Make the effort to get the most from your investment.