Customized Retirement Plan Communications Pack a Bigger Punch
Customized retirement plan communications pack a bigger punch. When it comes to communicating the benefits of an employer-sponsored retirement plan, one size does not fit all. Each generation has its own financial priorities and goals, from Baby Boomers on the brink of retirement to Millennials just starting out on the job. So as a plan sponsor, how do you make sure you’re communicating to each demographic in a way that resonates?
The answer: tailor your communications for each generation. In other words, make sure the message is uniquely customized to address their specific situation and life stage. For example, a communication about saving early when time is on their side would, obviously, be a lot more meaningful to early-career Millennials. On the other hand, Boomers who are closer to retirement would likely be more interested in tips on how to maximize catch-up contributions.
NBC News recently published an article offering retirement planning tips for workers of all ages. At 401kTV, we took it a step further. Here are our tips for effective retirement plan communications for a multi-generational workforce:
20 Somethings, aka Millennials
Known as Millennials, employees in their 20s are typically just starting out in their careers. The average class of 2016 graduate has over $37,000 in student loan debt, so most younger employees are probably more focused on paying off those loans than saving for retirement.
To that end, your challenge is twofold: making them aware of the retirement plan and its benefits, and convincing them why they should enroll and start saving right away. Again, communications that explain that time is on their side and the benefits of compounding are key. Focusing on tax benefits and maximizing their deferrals to get employer matching contributions is also important at this early stage.
Communications that help younger employees understand how much to save (experts say 8-12% of their salary) and how to allocate their assets will also be impactful.
30 and 40 Somethings
These employees may be starting families and/or buying homes, and their priorities may shift to focusing on these goals instead of saving for retirement.
At this stage, communicate the importance of keeping their retirement savings on track. It may be helpful to remind employees that they should leave their money in the plan so it can grow, and continue to set money aside, even if retirement still seems a long way off. It may also be helpful to educate them about the pitfalls of raiding their retirement accounts for a down payment on a home, including having to repay those loans if they resign or are laid off. Leakage — cashing out retirement accounts or taking loans — costs employees about 25% of their assets over time.
Retirement savings may also take a backseat to tuition payments as parents in their 40s send children to college. At this stage, it’s important to educate them that retirement savings should come first, as college-aged children can opt for scholarships or loans, whereas retirement is a self-funded venture. Additionally, 40-something employees who are behind on their savings efforts should receive communications about maximizing their contributions (in 2017, the maximum IRS contribution limit for 401(k) plans is $18,000).
For starters, late-career workers can benefit from education on catch-up contributions. In 2017, employees age 50 and older can “catch up” on their retirement plan contributions by saving an additional $5,000-$6,000 per year over the maximum contribution limit, depending on the type of account.
Education on budgeting and streamlining expenses can also be beneficial for this age group, as it’s important to help them understand their cash flow needs today and in retirement. That takes planning, and the earlier they start, the better off they’ll be. Financial experts suggest workers in this age group consider paying off their mortgage if they can, as it’s one big expense retirees are better off without. Finally, older employees will also appreciate educational seminars and access to resources to help them with estate planning, taxes and wills.
As you can see, workers at different ages and stages have very different priorities. As such, each needs specific information on how to deal with the issues they’re facing. So retirement plan communications for each group should be targeted to address their unique concerns. That way, they’re more likely to get the message and take action to be better prepared for retirement, no matter what phase of life they’re in.
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