Fostering Optimal Retirement Plan Participation

Fostering Optimal Retirement Plan Participation

This article was updated on July 20, 2018.

Fostering healthy retirement planning practices within a workforce is one of the most valuable pieces of support that an organization can offer. While offering learning strategies and support is important to employees across all generations, it is perhaps nowhere more crucial than with workers who will be retiring soon.

Workers who are 55 and older are primed for optimal retirement plan participation for many reasons, including the following:

  • Earning higher salaries than younger counterparts, making higher contributions more comfortable to absorb
  • Having a better idea of what expenses to anticipate during retirement, motivating contributions that will fully fund future need
  • Knowing that Social Security payments will likely not cover all future financial needs
  • Having opportunities for catch-up contributions to cover for fewer dollars saved previously

Employee Savings Varies By Age

According to findings from ADP Research Institute's Retirement Saving Trends white paper, 65.6 percent of employees over the age of 55 contribute to a retirement plan, versus just 41.1 percent of employees between the ages of 20 and 24. Several reasons contribute to the percentage of employees who don't actively save for retirement, including not having access to an employer-sponsored program (2/3 of small businesses don't offer retirement plans, for example) and not understanding the intricacies of retirement planning.

To support your workforce in the best way possible, try the following strategies to help employees save for retirement:

1. Sponsor opportunities for employees to meet with investment and retirement professionals.

Sometimes the hardest part of planning for retirement is taking the first step. Even if your organization is not able to offer sponsored plans, you can still bring in professionals to talk to your workforce and give guidance on personal retirement accounts, such as IRAs.

2. Offer matching or incentive funds.

Seeing your money double — or at least grow more quickly — is a big incentive for employees to contribute to retirement savings. Many organizations offer a matching amount up to a certain percentage of an employee's salary — typically between 3 and 6 percent, according to CNN Money. If you offer incentive payments, bonuses, royalties or commissions — payments made at irregular intervals for non-set amounts — offer a mechanism to funnel some or all of that money straight to retirement accounts.

3. Keep employees in the loop about catch-up opportunities.

You should educate your employees about other benefits they might be eligible for. For example, employees who are aged 50 and older are eligible to stash away a higher percentage of their salary than their younger counterparts. The extra amount permissible by IRS regulation varies depending on retirement account type.

4. Encourage diversification of retirement accounts.

The old adage not to put all your eggs in one basket rings true for retirement accounts. A well-defined retirement plan may include many facets, including defined benefits (pensions), Social Security, annuities, 401(k)s, 403(b)s and IRAs, among others. Diversification not only provides mores avenues of income after retirement, it allows for more money to be put away each year, as well.

5. Remove barriers to participation.

Some organizations only sponsor retirement accounts like 401(k)s after a certain term of service. This can inadvertently mean that retirement planning simply falls off the employee's radar. Additionally, employees who are new to the workforce, have just re-entered the workforce or are uncertain about retirement accounts from prior employers can feel intimidated by the work it may take to initiate a new retirement account. Offering initial and ongoing support and simplifying the process for retirement plan participation can increase both the pool of employees who take part and their overall contributions.

Opening and maintaining a retirement account can seem complicated and labor intensive to the uninitiated. HR leadership can go a long way toward dispelling that misplaced notion by offering education, support and a simple path to employee participation.