Retirement Savings – 4 Steps to Help Employees Save More. As 2018 gets underway, many of your employees have probably made New Year’s Resolutions; perhaps some of them are aspiring to get their finances in shape along with their waistlines. With new beginnings on the brain, now is the perfect time to remind your employees about the importance of participating in their workplace retirement plan, and somethey can take to get their savings off to a strong start in the new year.
Step #1: Encourage employees to pay themselves first: Remind participants who haven’t already done so to automate their savings and make sure they’re socking away money for retirement every pay period. After all, if the money comes out of their paycheck first, they won’t see it, and they won’t be tempted to spend it or skip contributions.
Step #2: Talk up those tax breaks: Workers can invest up to $18,500 in pre-tax money into most employer-sponsored retirement plans in 2018. Employees age 50 and older can set aside additional $6,000 in catch-up contributions. That can add to big savings on their tax bill this year, not to mention help them sock away more for retirement.
If your organization offers one, a health savings account (HSA) is another tax-advantaged way for employees to save for the future. They can save pre-tax dollars today, and withdraw the money tax-free later on for qualified medical expenses — a hefty cost in retirement, for sure. According to studies fromand the , retirees may need between $275,000 and $350,000 to fund their medical costs in their post-career years.
Step #3: Invite them to save more: Financial wellness programs and clear-cut education programs can help employees better understand how to manage their money and strike a balance between meeting their day-to-day expenses and saving for the future. You can accomplish this with helpful, targeted communications that explain to employees how to cut unnecessary expenses and slowly and steadily increase their contributions over time — whenever they get a raise, for example. Of course, automatic contribution escalation, if it’s a feature of your plan, can also help boost savings rates.
Step #4: Help employees maximize their investing strategy: Educate your employees about the importance of understanding their investments and related fees. Paying too much for their investments could take a huge bite out of their savings. In addition, make sure to educate your participants about asset allocation and taking too much risk, or not enough, with their retirement investments. You can help by fulfilling your fiduciary duty as a sponsor and ensuring the investments offered in your plan are reasonable and affordable and offer a variety of options to suit your participants’ needs.
These four steps can go a long way toward helping your employees build a strong foundation for retirement in 2018 and beyond. Why not resolve to help them save more by kicking off the year with a strong communications campaign to get them motivated and excited about your retirement plan? With the new year upon us, there’s no better time than now to send a strong message about saving.
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