Did you know that 20% of Americans don’t think they’ll ever retire? Maybe it’s because they’re living paycheck to paycheck, haven’t started saving, or think Social Security retirement income will be enough.
Good employers can play a significant role in helping employees overcome financial challenges, get valuable education, and find the proper motivation to prepare for retirement. While offering a retirement plan is an excellent start, there’s more that employers can and should do.
No matter the size of the company, consider the following seven ways to encourage employees to save for retirement sooner rather than later.
1. Pay a 401(k) match
If am employer offers a 401(k) or 403(b) retirement plan, they can take it further by paying a match. That free money can prompt workers to enroll and boost their contributions.
Employers often match employee retirement plans on a percentage of income, such as 50% of employee contributions on up to 6% of wages. Or, the employer could match 100% up to 3% of a worker’s salary.
2. Use a default opt-out
An opt-out feature automatically enrolls workers in a company’s retirement plan unless they choose not to participate by actively opting out. In other words, workers must take action not to sign up. That translates into many employees following the path of least resistance and making regular retirement contributions without thinking about it.
3. Give benefits to more workers
Offering retirement benefits to new and part-time employees can help attract and retain top talent. Plus, not imposing a lengthy qualifying work period encourages more workers to save for retirement and consider their financial futures.
4. Offer target-date funds
If employees aren’t sure how to safely invest funds in their retirement plan, they may not understand how to build a portfolio that reduces risk. That’s where offering diversified funds—such as target-date funds that automatically adjust investments based on your expected future retirement date—can help.
An investment fund is a basket of underlying investments, such as stocks, bonds, real estate, and precious metals. They make it easy for employees to choose one fund instead of many individual investments. That allows participants to quickly diversify their investments, minimize risk, and save more for retirement.
5. Create a profit-sharing plan
A profit-sharing plan is another benefit that encourages employees to save for retirement and reach company goals. For instance, if the company achieves an annual sales or profit target, some employers contribute a set bonus to each worker’s 401(k) plan. When the company wins, everyone wins!
6. Provide financial wellness programs
Many employees are unfamiliar with personal finance topics, such as saving and investing for retirement. Consider offering lunch-and-learn presentations, email newsletters, and free financial resources to boost workplace financial literacy. The more educated employees are about retirement savings, the more they’ll make it a priority.
7. Offer free financial advice
To take workplace financial education a step further, many employers give workers free financial counseling from the retirement plan’s brokerage service. Qualified advisors can offer customized advice to help employees set financial goals, create a budget, choose investments, and manage an old retirement account wisely.
Offering free financial counseling over the phone or in-person shows employees that employers care about workers’ financial wellbeing. Additionally, it’s a boon for the company when financial planning reduces employees’ stress and increases their productivity.
Laura Adams is a nationally recognized personal finance and business expert and author of nine books.