Employers have the opportunity to make positive changes that can extend far beyond company walls. They play an important role in the social and economic well-being of our country and hold one of the keys to helping us solve the retirement challenge. We can’t change the way people think about retirement overnight. It will take time, but the long-term payoff will be well worth the effort. Below are five steps toward helping to improve your employees’ retirement benefits:
1. Realign Plan Design
One of the simplest places to start is to make sure your plan’s design is still meeting the needs of your employees. There are powerful tools available today—such as auto-enrollment and auto-escalation to help employees get ready for the realities of retirement. With the majority of plans (63%) still auto-enrolling employees at a default contribution rate of 3% or less, a rate that is typically not going to help employees achieve their retirement goals, one effective approach is to set a higher default rate of at least 6% and then nudge up this rate using auto-escalation over time.
2. Encourage Overall Savings
Our retirement crisis is really a savings crisis. Encouraging employees to strengthen their overall savings could eliminate the crisis. However, we are a nation of consumers, not savers. Not only are we spending, we’re spending more than we are making. With this in mind, employers should think about focusing on financial wellness first. A financial wellness solution should help your employees set a foundation to save more by helping employees reduce debt, build an emergency fund, and become smarter spenders.
3. Personalize Communication
We live in a world where everything is personalized to our preferences—whether it’s when we order pizza, buy shoes, or even purchase a car. Research shows that personalization helps build trust and encourage action. Personalizing both employee communication and plan design is going to be critical to get employees engaged in their plan and to encourage positive progress.
4. Redefine Success
As an industry, we need to rethink how we are measuring our plans’ success. In the past, plans have set goals such as participation rates and average account balances, but these are meaningless if employees don’t accumulate enough to get through their retirement. For example, if 95% of your eligible employees enroll in your plan, but only 5% are on track to retire with enough money on time, can this plan be considered successful?
Success should be redefined in a way that is a real, measurable goal you and your employees can aim for throughout the saving process.
5. Rebrand Retirement Benefits
Change how your employees think about retirement benefits and help them see saving for retirement as a civic and social responsibility such as voting, recycling, and staying physically active to be healthy. Finding innovative ways to make saving fun and rewarding may help your employees save more and save better.