401(k) Day: A Q&A with Qualified Plan Advisors’ Chuck Smith, J.D.

Chuck Smith and his team at Qualified Plan Advisors have been taking steps literally, to highlight the importance of financial literacy in conjunction with 401(k) Day this week. The team set a goal of collectively running 401 kilometers – or 250 miles – throughout the week leading up to National 401(k) Day on Sept. 8.

The idea began with a Dilbert cartoon some years ago in which Catbert, the evil director of human resources in the comic strip, asks why the boss hasn’t signed up for the 401(k), to which the boss replies, “I’d never be able to run that far.”

Smith often thought of that cartoon over the years and this year he proposed the idea of running 401 kilometers in a week to raise awareness for 401(k) Day, designated by the Plan Sponsor Council of America as the Friday after Labor Day. Although he is a prolific runner, Smith admits it was an ambitious goal for one person. However, his team embraced the idea as something they could do together to benefit Junior Achievement of the Midlands.

“It’s hard to overemphasize how much of a stretch this is for all of us, because we’re all doing different amounts, and we’re all doing probably twice as much as we’ve ever done before,” said Smith. “We’re really pushing the envelope, but it’s also become a great team-building opportunity for us, and the point of it is just to bring awareness of the importance of saving for both participants and also employers so that they can promote the 401(k) and improve participation in plans.”

Smith shared some of his thoughts about the value of 401(k) Day, the importance of financial literacy and how employers can help their employees build retirement security.

Q. Why is it important to raise awareness for financial planning and the value of 401(k)s/?

For most individuals, it is their primary savings vehicle. You’ve got Social Security, you’ve got equity in your house, and then the third thing is your retirement plan – specifically your 401(k). Employers, with their advisors and the record-keeping industry, have devised these tools to make it super easy and it has become a huge wealth generator. 401(k) Day is a good reminder and that’s why we were trying to bring awareness to it. I use the analogy of Valentine’s Day. We may not always express our feelings for our significant others, but on Valentine’s Day, you kick that into a different level and demonstrate your commitment. We’re trying to get awareness about 401(k) Day out there for the same reason. We’re trying to make it into a week where employers should be taking a proactive step and engaging employees and making sure that they’re informed about their retirement plan and financial literacy.

Q. How can employers build awareness among employees about the importance of planning for their finances in retirement?

I don’t think they need to reinvent the wheel. It’s just a matter of being engaged with those who are able to assist them. Work with a good advisor and work with a proactive recordkeeper. These two groups have all the tools you need. They work with all types of employers and different employees and they have built out all these amazing tools to help employers. They just need to take those established tools and tailor them for the specific situations of that employer. We’re sending out videos to plan sponsors that they can disseminate to their employees reaffirming the value of the 401(k) and how they can participate. We’ve created new flyers that our plan sponsors can post or email. This isn’t a heavy lift from the employer standpoint, It’s just being receptive and appreciating the importance of 401(k) Day and then taking those things that are being provided to them and using them in an effective way.

Q. How does financial literacy play into retirement preparedness?

Obviously, it is very important. There’s a recent statistic that said 61% of people are living paycheck to paycheck, especially with inflation and everything that’s going on now. A lot of that has to do with financial literacy. Inflation isn’t unexpected or something that’s never happened before. So-called emergencies happen, and it’s having that financial literacy to be able to deal with them. It’s not just low earners, it’s higher earners as well. Within the past week, I saw a survey that showed that higher earners were more likely to overestimate their retirement readiness. They need financial literacy to understand their true situation. They may make a lot of money, but they can still be living paycheck to paycheck.

Q. What can be done to increase financial literacy?

That’s why we chose to partner with Junior Achievement for this 401(k) Day run. Their focus is on financial literacy for K through 12, which we think is a perfect complement to the financial wellness services that we provide. Sometimes when we do group meetings and one-on-ones, people come with a lot of prior questionable financial decisions – whether it’s credit card debt, mortgages, student loans, cars that are financed that are just too expensive, or they purchased the wrong type of insurance. So our first step is to help them clean that up and then start tackling the retirement question. We’re not going to push someone to put 10 or 15% into retirement when they’ve got credit card debt or they’re struggling with their student loans. Junior Achievement equips young people with that knowledge and those skills so that when they start their careers and  first gain access to a retirement plan, they can set out a plan to be able to retire comfortably or possibly with prosperity.

Q. What are some of the important stages of life where employers can help employees better save for retirement and how?

There are many stages of life during which an employer can help. At hiring, without a doubt, is the most important within the first month to familiarize them with the 401(k) and how it works, and have a discussion about what level of savings would be appropriate for them. However, that can’t be the end. There needs to be constant interaction. One way would be to do annual surveys to find out what is front and center with your employees instead of guessing. How much of a concern are their finances and what are they struggling with? Do they feel prepared? Are they stressed out? I think it’s important to identify what they are stressed about because that dovetails into those important milestones of life – when they are a new hire, when they have a baby, when they first purchase a house or they are moving houses, whether they’re paying back student loans or whether they’re planning for college for their kids. What if they get an inheritance? What if there’s a death in the family or they’ve got a spouse who passed away and need to deal with that.

Related: Employees, we have a problem! How employers can jump-start retirement savings

One of the things we do is financial education webinars once a month for all our clients. We never know what’s going to be perfect for every individual but throughout the course of the year, we’re hitting all spectrums of what employees could be dealing with, and then we use that as an offshoot to have individual conversations. The other time employers used to interact with employees is at age 65 when they are about ready to retire. We would go out and have those discussions and employees would ask for our advice. I want to say, “I wish you’d come earlier. It would have been far better to have a plan.” As an employer, making sure that employees have access to information and resources constantly can assist them through all these different stages.