Financial stress is at an all-time high. The National Endowment for Financial Education revealed that nearly 9 in 10 people say that the pandemic is causing stress on their personal finances.
Covid-19 has changed the retirement timeline for many Americans. According to studies, 20% of Americans plan to delay retirement beyond their previous expectations. Many employees also took advantage of CARES Act loans or withdrawals from their 401(k) plans this year and discontinued savings into their 401(k) due to cash flow issues or because their employer suspended matching contributions.
As a business owner, you may be wondering what you can do to help. Adding a 401(k) plan or improving the plan you currently offer can dramatically improve your workforce’s financial well-being.
Why Money Matters
It behooves you to help your employees recover financially and get back on track for retirement because it can save you money:
- Delayed retirement has a real cost. According to a 2019 study by Prudential, a one-year increase in average retirement age can increase workforce costs by between 1 and 1.5 percent annually.
- Financial wellness also has a real cost. Financial security is a significant part of the mental and emotional health of working adults. PwC confirms that workers can spend hours per day thinking about or dealing with financial issues. 40% of struggling employees say money concerns keep them from doing their best work. As a result, they are more likely to have higher absenteeism, much lower productivity rates, and can cause damaging business side effects within your team and with your customers.
Compounding Interest
Remote work was already a growing trend before the COVID-19 pandemic, and experts predict remote work is likely to remain above 22% through 2025. This dynamic creates a whole host of challenges for your human resources staff.
HR departments were accustomed to holding in-office presentations and company meetings to educate employees and help them make 401(k) investment decisions. Therefore, it will require additional attention and efforts to engage your employees.
Creating Value
We can provide you with solutions to help your employees go in the right direction to rebuild their short and long-term savings. Some options include:
- Guidance: We provide guidance on optimal portfolio risk levels, fund allocations, saving recommendations, and retirement age recommendations, along with ancillary services such as information on when to claim Social Security retirement benefits.
- Coaching: Financial wellness coaching can help employees refocus on savings by working with them to develop a plan and budget for repaying any 401(k) loans or withdrawals, resetting their 401(k) savings, and rebuilding emergency savings. Coaching empowers employees with the confidence and understanding they need to take control of their financial planning.
- Account options: Consider including both target-date funds (TDFs) and managed accounts in your 401(k) program to appeal to more plan participants. Both types of accounts provide investors with guardrails along the road to retirement because both automatically reallocate investments. Morningstar research shows that younger workers tend to opt for TDF’s and more senior-level workers opt for managed accounts. In general, remote workers, regardless of age are more likely to opt-into managed funds.
At PT Business Solutions, we are known for our customized and personalized services across all employee benefits. Financial wellness is within reach for you and your employees. If you are interested in discussing group retirement plans, please contact me through my broker dealer at: cpontrelli@woodburyfinancial.net.
