Impact on long-term organizational success
Research shows only about one in five Americans are confident they'll have enough money to live comfortably throughout retirement. Disclosure 1 Employers that recognize the seriousness of the retirement readiness challenge can help turn this situation around.
For employees, a lack of retirement readiness can mean being forced to continue working during a time in their lives when they'd rather be doing other things. Also, some employees of retirement age that have inadequate retirement savings may be unable to continue working because of age-related health problems, a financial disaster.
For employers, a broad retirement readiness shortfall can result in a less motivated and productive workforce, higher payroll and employer-paid health benefits costs, and limited opportunities for younger workers.
Participant communication and plan design
Addressing the challenge of maximizing employee retirement readiness requires the creation of a clear strategy, with effective steps on two fronts: participant communication and plan design. A retirement plan services professional can work with plan sponsors to build and implement such a strategy.
The key to the communication component is participant engagement. When employees take advantage of retirement-savings calculators and translate general principles to specific dollar amounts applicable to their situation, they become engaged. Effective retirement modeling tools can incorporate existing retirement savings along with hypothetical future actions and translate it all to projected monthly income at retirement.
When such tools are offered in the context of a sustained, demographically targeted, retirement planning educational campaign using multiple communications media, they prompt employees to adjust their savings pattern to achieve their goals.
Plan design works hand in hand with effective participant communication and education to keep employees on the path to retirement readiness.
In recent years, most plan sponsors have come to accept the importance of giving employees a firm nudge to take full advantage of their retirement plan through auto-enrollment features. Concern for employee retirement readiness has generally overtaken worries about being overly aggressive in inducing particular employee behaviors and the added cost in employer-matching contributions of maximizing participation rates.
Another important plan design element that can enhance employee retirement readiness is the automatic contribution step-up, which is also becoming more commonly accepted as a default feature.
Simplifying participant decision-making with suitable plan investments is also a key driver of retirement readiness. The popularity of target-date retirement funds reflects that principle.
Guiding employees along the right path
The job of putting employees on a steady path to retirement readiness is a dynamic and multidimensional process. It's also crucial to your organization's future. The task can be made easier with the support of a retirement plan service provider that can offer employees a host of complementary services supporting their financial needs.
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2016 Retirement Confidence Survey, available at ebri.org/retirement/retirement-confidence-survey/2016-survey-results(opens in a new tab).
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