Having a retirement plan in place is a great way for your business clients to attract and retain talent while allowing employees to save for the future — while paying less to the IRS.
However, there are a lot of misconceptions about retirement plans that may keep employees from enrolling. Here are some ways to help businesses navigate these often jargon-heavy waters.
1) Automatically enroll employees
I regularly encounter business owners who want their employees to save, yet see a low adoption rate. As the saying goes, “You can lead a horse to water, but you can’t make it drink.” Offering a retirement plan is not always enough to get people saving. However, if you automatically enroll employees in a plan, you are empowering them and removing barriers to entry.
The Employee Benefit Research Institute’s 2015 retirement confidence survey offered some enlightening statistics. When an employer automatically enrolled employees in a retirement plan, deferring 3% or 6% of their salary, at 3%, 50% reported they would raise their contribution while 39% would remain at 3%. Just 4% would reduce the contribution or stop the contribution altogether. At a 6% deferral rate, three in 10 would raise the contribution and 44% would continue the contribution. Astoundingly, only two in 10 would reduce the contribution and only 3% would stop it altogether. That’s a strong argument in favor of automatic enrollment, to say the least.
2) Consider a match
Even a small amount of a match encourages employees to save. Free money for employees also means a greater tax savings for your clients. The major bonus in the employer match is attracting and retaining talent. According to 401khelpcenter.com, the average company provides 2.7% of pay, with the most common type being a fixed match. A match is basically a free raise that goes toward employees’ future and is an easy sell, benefiting everyone.
3) Remove the scaryfrom the conversation
There is a significant distrust of Wall Street these days, and with good reason. The collapse of the market that threw us into a recession is still fresh in the minds of most people.
However, saving rates for millennials are higher than any other generation, which is counter to what one would think when confidence continues to be at an all-time low. The good news is that the Financial Technology (FinTech) revolution is emerging in a significant way, offering transparent online saving vehicles that lack the stiff jargon that used to be present with big banks and financial institutions across the board.
Whomever your clients choose as a provider, it’s important to ask questions to ensure they are making the best decision for their business, while also ensuring that they and their employees are retaining the majority of hard-earned and compounding dollars. Make sure you are in a “fine-print-free-zone.” Providers that are worthy of the money will offer your clients and employees exceptional tools and information to ensure they are making sound decisions for the future. In today’s FinTech world, your clients and their employees should experience retirement savings as simple as point, click, save — no paper, no fuss, no jargon.
Also see: "The IRS wants to pay you to save."
Establishing a retirement plan in the workplace doesn’t have to and should not break the bank. Make sure you do your homework and ask the hard questions. Increasing participation and getting the free tools to do so should be included in any plan you engage with.
Parks is founder and CEO of Ubiquity Retirement + Savings, formerly The Online 401(k), and executive producer of Broken Eggs, an independent, feature-length documentary about the looming retirement crisis in America.
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