by Rick Unser
How many of your retirement-age employees are just hanging around so they can receive benefits and collect paychecks, simply because they can’t afford to stop working? Dealing with an aging, financially unprepared workforce is a reality that should concern employers.
The percentage of people who expect to retire after age 65 has risen dramatically in the past two decades (see chart below). Health care costs for employees older than 65 are more than double that of employees age 45 to 55. And while the statistical rate of work-related accidents does not increase dramatically for employees over age 65, when incidents do occur they are more severe and cost more workdays.
So it’s in employers’ best interests to improve the retirement outcomes for their employees by creating a culture of retirement readiness. Here is a six-step plan:
1. Conduct a company retirement readiness assessment
Find out how many employees in each age group participate in your retirement plans. If you see pockets of low participation, create campaigns that speak directly to them.
2. Evaluate your plan design
Change anything that doesn’t encourage participation. Examples: Shorten the waiting period for new hires to enroll. Automatically enroll employees so they have to take action to opt out of the plan. Raise the contribution level at which you enroll employees. Build in regular, automatic contribution increases.
3. Communicate to change behavior
You need to communicate differently with a 25-year-old than with a 62-year-old. The older worker doesn’t need to hear about the benefits of a company match. If you’re looking to change behavior, make it easier. For example, call a meeting to explain how to enroll, and then let employees check a box on a card so you can enroll them. Don’t make them do it themselves later—they may never do it.
4. Offer retirement income solutions
Show employees how to convert their retirement savings to retirement income. Most of the education around retirement plans revolves around saving, investing, diversification and growth of money. Start talking about how employees can make sure their nest eggs will last throughout retirement. Also, educate employees about annuities, the benefits of bonds and other investments that can convert to income.
5. Be strategic with company matching dollars
Maybe your organization has always offered a 100% match on the first 2% of income that an employee contributes to the plan. How about offering to contribute a 25% match to the first 8% that the employee invests? It will cost your company the same while encouraging the employee to save more.
6. Measure constantly
Designing a plan and a strategy isn’t a one-time thing. Measure your success at least annually to determine if more employees are participating in your firm’s plan and if they’re investing a greater proportion of their incomes. If not, change your strategy again.
Author: Rick Unser is vice president of Lockton Investment Advisors in Los Angeles.
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