Michelle Fuller, an account executive in the area of employee benefits with Stewart Sneed Hewes, a division of BancorpSouth Insurance Services, says employers can help employees understand the importance of saving for retirement without giving investment advice.
“Employers can motivate employees to save by annually hosting re-educational meetings and zooming in on specific topics,” Fuller said. “For example, there are Internet tools available such as retirement calculators and information to help employees understand investing, strategy and setting of goals.
Here are some tips from Fuller on how employers can motivate their employees to save:
Employees need to be encouraged and reminded to get involved in their retirement plan. The first step is to begin saving. Start at a comfortable level. Whether the employer makes a matching contribution or not, not participating only hurts the employee.
Employees need to evaluate where they are. You know the old cliché, “People don’t plan to fail, they fail to plan” still holds true today. It may mean boosting retirement savings a few percentage points but this can be done painlessly with a strategy.
Set a goal
Once the employee has evaluated where they are and where they need to be, they should increase their savings percent quarterly, semi-annually or annually. They need to have a goal and stick to it until they reach the level of savings they will need for retirement.
Employees should have an investment strategy. A common practice is; employees get in the plan, select their investments and never look back. Employees need to check and recheck their investments to ensure they are in the appropriate investments for their life stage. Many plans have included the increasingly popular Lifecycle or Lifestyle type of investments. Offering these types of accounts takes the guesswork out and lessens the employee’s frustration level toward investing. Generally, these accounts rebalance periodically and offer an array of asset classes such as domestic stock, international stock, cash, bonds, real estate, etc.
Offer/use a profile quiz
Employees should be encouraged to take an Investment Profile Quiz that is designed to help them understand their tolerance toward risk. Once they understand risk and understand how the market works, they are less likely to put all their eggs in one basket and more likely to do a better job of asset allocation.
Automatic enrollment/automatic step-up
Automatic enrollment/automatic step-up offered in a retirement plan tends to promote higher enrollment and consistent contribution levels. New hires are automatically enrolled at a level set by the employer.
Contact MBJ contributing writer Becky Gillette at email@example.com.
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