Engaging participants in workplace retirement plans is a top priority for plan sponsors. That’s according to a new survey from the Plan Sponsor Council of America (PSCA), cited in a recent BenefitsPro article. At issue is a pervasive lack of financial literacy and awareness, which hinders individuals’ ability to successfully plan for retirement. To help overcome these challenges, one solution worth considering is delivering timely, age-based advice via advicetech platforms.
Providing age-based advice that’s relevant to participants’ age and stage of life and their financial goals is paramount to engaging them in retirement planning. As they achieve different milestones, the financial advice they receive should be geared toward their evolving needs and opportunities. According to BenefitsPro, this advice can be automated because it’s predictable. For example, workers age 50 and older can make catch-up contributions to their retirement plans. However, catch-up contributions are often underutilized, with 84% of eligible individuals failing to make these contributions to their retirement account, according to research cited in BenefitsPro.
One reason for a lack of action is participants simply don’t know what they don’t know. That’s where advicetech platforms can help by providing retirement plan advisors with automated alerts so they can reach out at appropriate times and deliver the advice participants need most at the right time. According to the BenefitsPro article, “Combined with clear, insightful communications, these platforms amplify the accessibility and understanding of such contributions, encouraging proactive, informed decisions.”
Advicetech platforms also empower retirement plan participants and advisors by providing tools, real-time feedback, and intuitive interfaces that help improve engagement and simplify financial planning. This combined with commonly used retirement plan features such as automatic enrollment can help nudge participants past common behavioral hurdles such as inertia and encourage them to make proactive, informed decisions about their futures.
A lack of engagement with retirement plans may also have to do with the fact that many individuals are struggling with debt—in particular, student loans now that payments have resumed after a several-year hiatus. In fact, as many as 40% of student loan borrowers are missing payments, according to Department of Education data cited in a recent Employee Benefit News article. Fortunately, there are ways employers can help.
The SECURE Act 2.0 allows employers to make matching contributions to employees’ student loan payments, just as they would with 401(k) contributions. Taking advantage of this provision allows employers to address a big financial burden for employees and potentially help clear a barrier to retirement savings. Employers can also educate employers on their options for student loan repayment. For example, many borrowers aren’t aware that federal student loans come with benefits such as income-based payment plans and, in some cases, forgiveness opportunities. Not only can this help reduce employees’ student loan payments, it can also save money for employers who are making contributions.
Finally, employers should consider incorporating student loan repayment benefits into their financial wellness offerings. Mounting student loan debt inhibits employees’ ability to save for other goals, such as retirement and protecting their families. Offering such benefits can help employers stand out from the competition when it comes to recruiting and retention.
