Five Steps to Boosting Employees’ Financial Literacy
By Latoya Scott
May 4, 2017
Reaching employees with retirement advice early in their career is a key to their long-term financial success. Yet that is not easily done. Just one in five workers feel confident enough to talk about retirement issues, according to an EBRI report. And many are consumed with near-term financial concerns.
Only 9% of workers with student loan debt feel ready to talk about retirement saving and just 14% without an emergency fund feel ready, according to a report. These findings suggest that a more wide-ranging financial discussion is needed to engage new employees in retirement talk.
“Workers need and want help with their entire financial picture and the majority are looking towards their employer for guidance and advice,” says Alexander Assaley, managing principal with AFS 401(k) Retirement.
The Ontario Pension Board is often cited as a leader in this kind of thinking. The board communicates with plan members in a way that addresses immediate as well as long-term financial concerns. Their approach includes tailored messages and feedback, and it incorporates individual planning tools. They also offer in-house financial planning with a pro.
Here are five specific ways the Pension Board says benefit administrators can meet their employees’ needs:
Teach critical planning skills with tools that look at current income, future Social Security benefits and income from projected retirement savings.
Offer automatic enrollment in a 401(k) plan, and make yearly contribution increases automatic as well.
Provide access to professional advisers to help employees become more confident with their retirement plans.
Offer tools that analyze individual payroll data and provide personalized retirement advice.
Give employees access to online tools that help them work on their financial skills on their own time.
After adopting a wide-ranging financial wellness program, one organization in the AFS data bank saw a jump in retirement plan participation rates from 73% to 93% in less than a year. Workers want to think long term. A broad approach to financial wellness will help them get past their near-term issues and focus on the tough issue of retirement security while they are young enough to benefit from decades of compound growth.