401(k) Day: Employer best practices to bolster support for employee retirement planning goals

As workers contend with the rising cost of living and the associated stress of managing their finances, retirement planning is being put on the backburner. A recent study by Lincoln Financial Group, 2023 Wellness@Work. has revealed that 68% of participants say they are saving less than what is needed and 65% say it would be difficult to save more.

Competing financial priorities is a factor, and so is confidence in retirement planning and decision making. Surveyed participants who are confident about their ability to make retirement decisions are two times more likely to be contributing more than 15% of their income to their retirement plans. However, our research found that less than half (44%) of surveyed participants say they are highly confident about making financial decisions in their plan (e.g. choosing investments, contribution rates). Many are unsure what steps to take in the current economic climate, especially navigating inflation and market volatility.

The good news is employees want help, and, more importantly, they know they need help. 62% of surveyed participants would like to receive education about the topics they’re less confident about, such as saving and investing decisions, the impact of the current economy and managing through retirement. This is good news for employers. Empowering confident decision-making can help increase participant success, employee loyalty and overall satisfaction; and it’s a top motivator for saving more.

This 401(k) Day on September 6, employers can bolster their support for employees’ retirement planning journeys by offering tools to take control of their retirement goals. Employers can help their employees tackle their concerns and boost confidence along the way. Let’s explore three ways to do so:

#1: Use plan design and personal support to drive enrollment

There are many ways employers can encourage non-participants to enroll in a retirement plan, such as auto enrollment, employer match, one-on-one support and in-plan income options. Automatic reenrollment makes it easy for employees to stick to and achieve their long-term financial goals and makes it more likely they will stay in the plan.

When speaking with surveyed non-participants, we learned 74% wouldn’t mind if their employer auto enrolled everyone not currently in the plan and 62% said they would likely stay in the plan. We also learned four in 10 approve of an auto-enroll rate of 3%, but more than a third (37%) think the default should be higher than 3%.

#2: Offer more comprehensive defaults, including a guaranteed income solution

The need for guaranteed income solutions is growing. 35% of surveyed participants said they would increase their contributions if offered a guaranteed retirement income option, and 72% of surveyed non-participants say having a guaranteed income option in their plan would encourage them to participate (up from 52% in 2021). Guaranteed income solutions can help create a foundation for security, providing monthly income that continues for as long as the participant lives. In addition to guaranteed payments for life, participants can enjoy protection from market declines, participate in rising markets with potential to increase their income level, have the flexibility to access their underlying account value and more.

#3: Provide additional opportunities to create a personalized retirement savings plan

 Employees may still need help personalizing their plan for retirement. Every individual needs to factor in their own unique circumstances and long-term financial goals, both before and after retirement. Providing employees easy access and the opportunity to meet with a financial professional, such as a retirement consultant focused on participant education, can give them the confidence they need to make positive, impactful decisions about their retirement journey.

Interest in help from a retirement consultant was up significantly from 2021 to 2023. And individuals who work with a retirement consultant are more likely to say their employer does a good job of preparing them for retirement and feel more confident about making decisions about their participation in the retirement plan. 58% of employees said they are looking for help choosing investments that align with their savings and risk profile and 57% said they need help determining how much they should save.

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

By offering these services, in addition to general retirement education, employers can significantly improve the outcomes of their employee’s retirement planning journeys. Although they may seem small, these changes can have a big impact, both for workers seeking additional help to navigate their financial future, and for employers seeking new ways to support their employees.

Ralph Ferraro is Senior Vice President, President of Retirement Plan Services, Lincoln Financial.