How do your employees picture retirement? Are they on a beach somewhere sipping bottomless mimosas? Maybe taste testing all of the gelato in Europe? Whatever their retirement plans are, the reality is they actually have to plan for them. It’s important they’re well educated and diversified in retirement options to know what to expect.
Automatic plan design features such as: auto-enrollment, auto-increase, and default investment options have made strides in getting employees closer to retirement readiness. Combining those features with quality retirement plan education is important to get participants to the next step. Increasing active engagement in the retirement plan can help employees maximize their retirement savings’ potential and combat some of the financial challenges that may fall in their path.
Below are five reasons why education is an important component of retirement success:
- It can help employees navigate retirement concerns. 58% of employees worry that they will outlive their savings. Inflation and market volatility are a top concern. Retirement plan education can help employees understand how much they might need and what they may anticipate for healthcare costs to promote better planning.
- It can empower employees to overcome current obstacles. According to Society for Human Resource Management in 2022, nearly half of Americans have stopped saving for retirement. This is because of increasing prices for necessities such as groceries, gas, and housing. Education can show employees how saving may fit into their current situation and even a small amount can impact the future.
- There are increased demands on retirement income. People are living longer than ever before, which means their retirement income may need to last longer. Furthermore, more active lifestyles filled with travel and hobbies place larger demands on retirement income. Educating employees on their provider’s retirement income tools can help define what they may expect to have in retirement, and how to potentially increase their retirement income if needed.
- There is uncertainty regarding Social Security. In 2023, 67 million Americans every month will receive a Social Security benefit. 73% of working Americans believe that their Social Security benefits won’t be there for them in retirement. Uncertainty over Social Security, particularly for younger employees who have decades before retirement, emphasizes the importance of promoting active planning sooner rather than later.
- It can help minimize the overuse of loans and withdrawals. Many employees don’t see the harm in using their retirement savings for non-retirement expenses through loan and hardship provisions. Education can help employees understand the tax and retirement implications of these actions and can encourage employees to prepare for unexpected financial circumstances without reaching into their retirement assets.
To learn more about retirement plan education contact an MMA advisor today.