Setting your employees up for savings success

Is there anything that brings out the best in human nature more than money? We generally have a reasonable notion of what is and is not best for us, but where things become complex is in the distinction between our wants and needs. What seems significant to us now may be at odds with what is best for our future. While we may never be able to provide a short-term financial path that prevents employees from getting in their own way, we must ensure that we provide a long-term path to success.

We are all aware that there is an abundance of information available. The internet and social media have given everyone a voice – and a chance to be thoroughly confused by misinformation and half-truths. You have a unique opportunity to promote proven financial realities as the trusted employer for each of your employees, cutting through the endless selection of easy buttons continually demanding their attention.

So, where do we start?

Regardless of knowledge, experience, income, gender or age, we all start from the beginning when it comes to 401(k) savings. Enrollment in the 401(k) may be exciting for some, but for most, it’s a frantic race to check the right boxes and hope for the best. Let’s identify how we can turn this hurdle into an opportunity for two common groups of savers.

Early Career Savings Rookie

First-time savers need to see the incredible and irreplaceable value of getting off to a fast start. An automatic enrollment method is the best way to engage this demographic. Whether we’re talking about retirement savings or organ donation, data shows we’re unlikely to “opt-out.”

Beyond the mechanics of automatic enrollment, there is a story to be told around how this process helps more employees than ever reach their goal of financial security, flexibility and confidence. Employees should start with what they can afford and increase 1% each year until they reach a total of 15% savings. Before you know it, they will achieve the employer’s full match, saving more than they ever thought possible. Plus, they would have done it without derailing their current lifestyle.

Interestingly, many employees feel that being automatically enrolled is somehow to the advantage of their employer. Employers should take this misunderstanding into account when implementing automatic enrollment, ensuring employees understand why it’s beneficial to them, and utilizing data to showcase the results they’ll likely see if they’re enrolled, versus if they are not. Establishing a clear narrative from the start and communicating in a transparent and easily understood manner will help gain their trust.

The Prodigal Saver

Savings detours are more common than not. Whether an emergency, an opportunity, or simply bad money management creates a gap in savings, it is critical to get back on track as soon as possible. The number one culprit preventing employees from saving as much as they need is debt.

Regardless of how an employee accrued debt or the length of time required to repay it, there are avenues to reduce debt while growing savings. An easy way to create an accessible and inviting financial wellness program is to provide consistent access to a variety of topics that are beneficial to the employee. The straightforward concept of using lump sum assets, such as tax refunds or bonuses, to pay down debt while automatically increasing 401k contributions by 1% each year helps employees  breathe better and focus on increasing productivity. That’s a win-win.

Enrollment… Who’s in control?

Take the historically overwhelming task of getting started and turn it into a non-event. With a strategy designed to “Pre-Set” for success, your employee base can fully embrace one of the most significant benefits you offer them. Once they’ve established a savings habit, you can go on to more in-depth education about investment and Roth vs. pre-tax options.

While each employer’s enrollment process is unique, the option to begin saving within 60 days of hire has a significant impact on how employees perceive the benefit, and how their employer perceives them. Even if you offer “dual eligibility,” in which participants can begin saving immediately but will not be eligible for a match for one year, you are preparing them for success.

No surprises

Catch your new hires early with a simple synopsis of what the 401(k) offers, what decisions they will need to make as they are enrolled and any deadlines they should be aware of. A simple PDF with highlights of the plan and who to contact for service or advice will help employees understand the value you put on this benefit, right from their first interaction with the organization. Even better, a 10-minute video introducing the 401(k) and speaking to the incredible value this tool can provide throughout their career. Attachments introducing Roth, beneficiary election and rollover forms will have your folks in the know and reduce the number of calls your HR/Benefits team receives.

The bottom line is it’s a confusing world out there for employees, but the 401(k) is the tool every team needs. Make this the year you work with advisors to sharpen that tool and create processes that focus on helping your employees meet their financial goals. This will show them they are known, heard and on their way to the finish line, regardless of where they are starting from.

MJ Goss is VP Retirement Planning & Financial Wellness at OneDigital.