Baby-boomers have only saved $50 to $150K (depending on the study you read) on average for retirement. To continue to maintain their current lifestyle, most will need significantly more money than that. So how do we solve it?
If you look at the retirement savings of America in the aggregate as one big pool, where is most of the leakage? It is in the times of transition – when people change jobs or companies are bought and sold. We can do all we want with automatic enrollment and auto escalation and build great momentum toward strong account balances for many of the rank and file employees. We can educate them, but dangling the carrot of taking a big 401(k) balance in combination of the allure of purchasing a new boat when they change jobs is counter-productive to solving our crisis.
It is also important from a company perspective – the cost of an older workforce that can’t retire because they haven’t saved enough can be counter-productive to a company’s goals. Of 100 people, only 8 have a greater than 75% chance to become a Rising Star or High Potential employee (HIPO). Retention of these employees is a key element to a company’s continued success, yet many companies struggle with keeping them. Having a structure where these HIPOs can’t advance because there is not any room in the higher strata of an organization can cause issues with employee retention and morale.
In the bigger picture, getting people on track to where they can see the path to a secure financial picture leads to better employees.
We have identified these three top strategies to moving people toward a more secure financial picture:
- Have a retirement counselor proactively reach out to each employee during times of transition.
- Offer them programs that are the pathway that will lead in the direction of better decisions with money.
- Deliver a consistent message of the importance of retirement savings that comes from the highest levels of the organization.
We believe that these will begin to address the looming retirement savings crisis one company at a time while also preparing those organizations to stay competitive into the future.
Please note that these opinions are our own and do not necessarily reflect those of LPL Financial or Global Retirement Partners.