The Competition for Retirement Savings Dollars
In order to increase participation and savings rates in their retirement plans, plan sponsors need to figure out why people don’t save - and then provide solutions to address that problem.
Identifying the problem is easy; just about every survey I’ve seen has stated that the number one participant objection to saving for retirement is that they can’t afford it.
So, how do plan sponsors make retirement savings affordable? Well, the majority of participants who think they can’t afford to save for retirement, actually can. Plan sponsors need to understand that retirement savings is losing the battle for participants’ money.
Then who is winning? For most people, it is not discretionary spending (e.g., lattes, avocado toast, or any other mythical “luxury” that is allegedly stealing retirement savings dollars). It often includes:
- Debt (credit card, student loans, mortgage etc.)
- Bills (rent, utilities, cable, etc.)
- Other needs (groceries, healthcare, etc.)
- Emergencies (car repairs, house repairs, surprise medical bills, etc.)
The good news is that employers can help with these things. With regard to debt, employers can provide student loan repayment assistance, credit counseling, and/or refinancing assistance. Offering education and budgeting assistance can help employees learn how to reduce costs on bills and other expenses (as many people needlessly pay full price and/or confuse wants with needs). By coaching employees to create emergency funds through automatic savings programs, employers can better prepare their employees for the unexpected.
And finally, automatic enrollment is another powerful tool to ensure that retirement plans are winning the competition for dollars.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
Investment products available through Cammack LaRhette Brokerage, Inc.
Investment advisory services available through Cammack LaRhette Advisors, LLC.
Both located at 100 William Street, Suite 215, Wellesley, MA 02481 | p 781-237-2291