When many workers dont even know if their employer offers a retirement plan, some friendly advice can go a long way.
Discover effective strategies to motivate and guide your newly hired colleagues towards saving for retirement, even if they may be unaware of their employer’s retirement plan. Learn about popular retirement savings options such as 401(k)s and other similar plans, and gain valuable insights on providing friendly advice that will assist them in securing their financial future.
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The most important thing you can say to a new hire may well be: “Have you signed up for the 401(k) yet?”
An astounding 3 out of 10 workers dont know whether their employers offer retirement plans, according to a survey by research firm Morning Consult for the Certified Financial Planner Board of Standards.
“That was, quite frankly, shocking,” says Kevin Keller, the boards CEO. “But it clearly shows that people just don’t know what their options are.”
You might think people dont know because their employers dont offer such plans. After all, companies that lack retirement benefits typically dont point it out. And the 3-in-10 figure appears to line up nicely with the Bureau of Labor Statistics figures showing that 30% of workers dont have access to 401(k)s, 403(b)s, pensions or other retirement plans at work.
But when the CFP Board asked 2,200 American adults if their current employer offered a retirement savings plan for employees, 38% said yes, 32% said no and 30% didnt know. So, with the definite “No” answer accounted for, that leaves many, if not most, of that last uncertain group who may actually have access to a plan.
Why you should care
This survey finding should dismay employers, because retirement benefits are supposed to help attract and retain workers. If your employees dont know about them, those benefits arent doing their job. Rather than assume new hires are getting the word, companies should take every opportunity to explain the value of retirement savings plans and encourage participation. Better yet, make enrollment automatic — an increasingly common and effective option to start people saving.
The survey should concern you as well. Taxpayers shoulder the burden when people hit their retirement years unprepared. Impoverished seniors mean more strain on public assistance, especially Medicaid, the health care system for the poor that also pays for a lot of long-term care expenses.
This is where you come in. Sometimes, a one-on-one conversation can do more to persuade someone than any glossy brochure or email campaign.
Your nudge could spur action
In Josh Overmyers case, it was a two-on-one conversation.
Overmyer took a job in a Florida county planning department after college. Two of the departments administrative assistants, both in their mid-40s, dubbed themselves his “work moms” and took Overmyer under their collective wing. Among the many conversations they had about getting launched in the work world was one about the importance of paying himself first, or putting money into savings before spending on anything else. They recommended he sign up for the agencys 457 deferred compensation plan, a type of tax-advantaged retirement account.
“When youre 22, youre not thinking about retirement,” says Overmyer, who is now 36 and works for the Florida Division of Emergency Management in Fort Myers. “You earn the money, you spend the money.”
Overmyer was particularly taken with the idea that he could contribute $25 to the plan, but only $20 would disappear from his paycheck because the money was pre-tax.
“I thought that was really cool,” Overmyer says.
Jackie Beck was persuaded by the company match. Beck says she was “19 or 20” and working in a newspapers classified advertising department when her supervisor encouraged her to sign up for the company 401(k) plan.
“She pointed out that the match was basically free money, that there wasn’t a downside, and that I could stop participating at any time if I wanted to,” says Beck, now 51 and a personal finance writer in Phoenix. “‘Free money did the trick for me.”
Do as I say, not as I did
You dont have to be a great saver to nudge others, by the way. If you wish youd started saving earlier or saved more, you can share that sentiment while suggesting your coworkers not make the same mistake.
If youre not saving because you dont have a retirement account at work, know that you have plenty of company. Without a workplace plan, most people dont save: An AARP survey found workers are 15 times more likely to put aside money for retirement if they can contribute through payroll deduction.
Thats why 10 states — California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington — are rolling out plans to give small-business employees access to simple retirement plans through payroll deduction. Many other states are considering similar legislation.
You dont have to wait, though. You can contribute to an IRA and encourage your coworkers to do the same. Then you can start looking for a job with better benefits.
This article was written by NerdWallet and was originally published by The Associated Press.
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