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There is a savings crisis looming in the United States. Nearly sixty percent of Americans cannot afford to pay for a $1,000 emergency today and a quarter of the U.S. are underprepared for the future, living without retirement savings.
It's time for employers to join the efforts of closing the savings gap, starting with retirement. Why businesses? Because saving starts with your employer. For the majority of Americans, the 401(k) is their first — if not only — invested asset. In fact, according to AARP, employees are 15 times more likely to save for retirement if they can do so through their employer.
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So sure, it should begin with businesses, but why now? The Great Resignation is affecting nearly every industry—add to that an ongoing pandemic—and it's no wonder why 72% of employees report feeling stressed about their finances. As employers look to stay competitive in a worker's market, offering a workplace savings program can be a pivotal centerpiece of their recruitment and retention strategy.
Traditionally, small businesses have had difficulty offering employer-sponsored benefits, primarily due to exorbitant fees and challenging operational procedures required by legacy providers. As an entrepreneur myself, I've seen just how difficult it can be to implement a retirement plan without a benefits team in place. Fortunately, the landscape is quickly changing. New technology platforms are bringing down the cost for small businesses, and companies such as mine are aiming to offer employers a streamlined and holistic workplace savings platform.
Whether that small business is a technology startup, a hot new restaurant, or another small business, entrepreneurs now have the power to tackle the savings crisis head-on. Offering an accessible retirement plan can help employees save for the future and reduce their own financial stressors, which can directly improve their performance at work. Once the best plan for your business has been selected, I encourage small businesses to follow these helpful points to ensure all employees are maximizing their benefits.
Make the savings program accessible to everyone.
Right now, about half the US workforce (63 million individuals) do not have access to or participate in an employer-sponsored retirement program. For this reason, it is crucial that retirement plans are made available to all team members, regardless of title or employment status. Additionally, small businesses have the opportunity to go a step further: Talk with employees about saving, discuss planning for retirement, and build a culture that prioritizes open conversation.
Educate your employee savers.
Each employee is different, but retirement is of universal interest. Providing educational resources can further show your company's commitment to its employees. I believe it's important to provide information in an easily digestible format that allows employees to make informed decisions on what works best for their unique goals. Financial advisors are especially helpful in this area to engage and support your employees.
Plan for success
When setting up a workplace savings program, it's important to develop a plan that determines what success will look like for your company. Examples include having at least 50% of your employees signed up for automatic annual increases or having at least 75% of your employees actively contributing to their 401(k). Employer education initiatives will help make these goals achievable.
Understand the impact
It's important for employers to monitor and analyze the results of their workplace savings program. After implementing the program, ask the following questions:
- How can we iterate to make this better?
- Is the program equitably accessible to all employees?
- How can we further help our employees make the best financial decisions based on their individual goals?
Be a gateway for growth
Beyond the 401(k), ask "How else can I support your employee's financial well-being?" Nearly 43 million Americans (or 1 in 8 people) have federal student loan debt and almost 20% of Americans could not afford treatment if a medical issue arose. Offering a health savings account (HSA), a 529 College Savings Plan, or another form of savings account can help you tailor your offering to your employees' unique needs. Doing so can also help you differentiate your benefits offering from other companies that offer retirement plans.
There is momentum growing in the retirement industry and small businesses have the opportunity to significantly help their employees while doing their part to improve the savings crisis. With new entrants into the retirement technology space and the rollout of several state-run retirement plan options, there's never been a better time for small businesses to offer their first 401(k) or expand their benefits to additional forms of saving.
Aaron Schumm, is the Founder and CEO of Vestwell.
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