How to Get Your Employees to Participate in a Retirement Plan
In honor of National Save for Retirement Week, let's raise your employees' awareness about the importance of saving for a secure financial future. What can you do to encourage your employees to participate in your retirement plan?
First and foremost, host a National Save for Retirement Week initiative in your workplace. Provide planning materials to your employees so they are well-informed about how to proceed. But, beyond this week, saving for retirement should be a priority. What can you do to ensure the conversation about saving for the future lasts all year long?
Shorten or eliminate the waiting period for new employees to enter the plan
90 days may not seem like a long period of time, but in this fast-paced world, it's an eternity. In 90 days an employee may decide to keep their 401(k) where it's at, rather than rolling it over, or simply decide to move their previous savings into a different account. Shorten the waiting period and make it easy for your employees to commit to your program.
Consider automatic enrollment
Do the heavy lifting by enrolling your employee into your retirement plan. Odds are, your employees will continue with the plan. You're doing them a favor (and a service) by providing an outlet for their financial future. It is harder to make the conscious decision not to save for the future than it is to make a conscious decision to save. As the National Bureau of Economic Research (NBER) says, "If the goal is to get more employees to open 401(k) plans, then employees should not be required to actively initiate participation. Rather, they should be enrolled automatically (while retaining the option to drop out)."
Provide a matching contribution
No one likes to leave money on the table. If you incentivize your employees to contribute to their retirement by offering to match their funds, ears will perk up. Use a retirement calculator to see exactly what the impact of an employer match can have on your employee's retirement planning.
A matching contribution can effectively double your employee's savings.
Keep your employees informed of their successes
Whether you're the plan sponsor or a third party company handles the retirement plan, make sure your employees can see how their money is growing. Visibility into an employee's efforts allows them to see how the magic of compound interest works. As their money grows, their interest and participation will remain solid.
Provide monthly updates that clearly show how much money has been saved, and how quickly it's growing month-over-month.
Do a great job of designing a plan to meet the company's goals
Take into account all available retirement plans, the demographics in your workplace, and employee investment sophistication. Try to offer a broad range of investment options which will match the diverse demographic in your office. By providing options that can diversify your employee's portfolio, you'll provide both conservative and higher risk options that can fatten retirement savings effectively.
Be available for questions
The financial world is complex. It is difficult to understand how to diversify a portfolio, where to invest, and if someone is on track with their financial goals. Provide a resource for your employees to keep track. If you're a resource employees feel comfortable coming to with questions, they will continue to trust your program with their financial future.
A retirement account is one of the most beneficial tools an employer can provide. The more information and support you offer while an employee builds their financial future, the more participation you'll start to see.