Have you ever asked yourself, why do we have a retirement plan in place? Ever considered the ROI of your 401(k) plan? How about the cost impact of an increase to the average age of your workforce because they can’t retire? What is the most important objective the plan is designed to achieve? How does our approach to the retirement plan relate to our other benefit goals?
The majority of retirement plan committees with whom we currently work had no idea what their plan was designed to deliver before we started working with them.
In our experience this is due to a company not having clearly defined their objectives of the plan. In other words, what was the original purpose of implementing and offering the plan? Is that still the same purpose today? Many employers’ answer to the first question would be “to attract and retain talent” or “to offer a competitive benefit”. But viewing a retirement plan simply through that glass is very limiting in that it implies that once an employee is in the door, the job of the retirement plan is complete. If employees matter, a 401(k) plan can be so much more.
Try thinking about your 401(k) through the lens of whether employees have access to the tools and education they need to make informed decisions about their retirement. Studies have shown that plan participants would be encouraged to save more:
- If shown how much they need to save today per dollar of income they want in retirement.
- If they were told how much they needed to save to reach their retirement goal.
- If they were shown how much retirement income their current savings is on pace to generate.
In other words, people want to be able to definitively see where they’re going and what they must do to get to where they want to be. They also want to have a system that allows them to measure and track their progress.
The objective of the 401(k) might be encapsulated in a broader benefits strategy of first ensuring employees are financially well. Within the context of their larger financial picture they would then understand the appropriate amount they should be saving for retirement.
We believe it is best to have employees that are financially confident. If you agree, contact us to learn how we can help.
Please note that these opinions are our own and do not necessarily reflect those of LPL Financial or Global Retirement Partners.