Saving for retirement is an important consideration for workers of any age. But your employees may not be taking the proper steps to secure their future — because they don’t know any better.
A recent survey of 1,000 U.S. employees by Ramsey Solutions, which provides personal finance education, found that 40 percent of workers, including 70 percent with zero retirement savings, have no access to any type of employer-sponsored information about retirement or finances.
While some American workers do learn about retirement from their employers, many turn to their parents (35 percent) or family and friends (32 percent) for advice, found the survey. However, these sources may not give a complete picture of what your employees need to know.
“People often go to their parents, family and friends because they’re a trusted source,” Chris Hogan, a motivational speaker and financial coach for Ramsey Solutions, said in a statement. “Your friends and family may know what has or hasn’t worked for them, but they may not know all of your options when it comes to saving for retirement.”
This educational gap could account for the fact that American workers, particularly younger ones, aren’t saving nearly enough for their retirement. A 2014 report by HR management firm ADP, which aggregated anonymous data from 9 million U.S. employees using ADP services, revealed that less than half of workers ages 20 to 29 are currently saving for retirement, and those who are saving contribute less than 5 percent of their salaries to their retirement accounts on average. [See Related Story: [Should Your Small Business Offer a 401(k) Plan?]
Small businesses have even fewer retirement savings plan participants. ADP found that only 32.5 percent of workers at companies with fewer than 20 employees and 48.6 percent at companies of 20 to 49 employees are saving. Firms with 500 or more employees have a participation rate of more than 63 percent, likely due to the “auto-enroll” option many large employers provide. However, ADP found that overall savings rates are lower among these employees.
“The data suggests that particular attention needs to be paid to better engaging younger generations in the retirement savings process early in their careers, to help them achieve their retirement goals,” said Chris Augelli, a vice president and sales consultant at T. Rowe Price, and former VP of product marketing and business development at ADP Retirement Services.
What employers can do to help
The ADP report indicates that the key to higher participation and savings rates for retirement plans is effective communication and education. Employers of all sizes should be speaking with their staff about retirement savings options and encourage them to save as much as they can, and as early in their careers as possible, said Augelli.
Hogan agreed that offering comprehensive retirement education to your staff, as well as financial wellness programs that deal with concerns like budgeting and debt. The Ramsey Solutions research found that 90 percent of Millennials and Gen Xers, and 80 percent of baby boomers would be comfortable talking with their employers about retirement, so there’s a good chance your employees are open to receiving help with their personal finances.
“In the long run, you’ll have better participation rates and increased savings in your employees’ retirement plans,” he said. “Not only that, your employees will have a much brighter retirement future, potentially reducing money-related stress in the workplace. That’s better for everyone involved.”