Retire Ready

Surveys show 401(k) plans are the second most important benefit you can offer based on feedback from employees. If your employees aren't taking advantage of the plan, it's probably because they are not properly educated. According to numerous studies, the most talented and qualified employees have acknowledged having access to a 401(k) is very important to them. Undeniably, employers who are champions of their 401(k) have the greatest success with retaining quality employees. A good 401(k) or company-sponsored retirement plan can boost morale and increasing productivity. If you help employees move toward retirement readiness you will more likely build employee loyalty. Considering that most of your employees are working for you because they need to earn a paycheck, being a champion of your retirement plan means taking this benefit seriously, so you can help your employees become financially independent. Studies show most employees are mindful of their retirement, even if they are underfunding their plan. And for those who aren’t, you can lead them towards retirement readiness. If you don’t, you may find yourself stuck with aging employees who work because they can’t afford to retire. Research shows workers over the age of 60 are happy workers if they don’t financially need to work. But if they must work because they have no other financial means, studies show they are not content and are likely to be detrimental to morale and productivity.

Let’s face it, it’s hard to maintain fervent output as we age. Who wants to work an entire lifetime and finally hit that stage in life when your body wants to slow down, only to discover you can’t afford to

retire? While today many are choosing to work beyond normal retirement age, there is a big difference in attitude from those who have to work versus those who want to work.

The most important key to a successful retirement plan is focusing on the employee. Everyone is caught up in compliance and audits and fees, but the central part of your retirement plan is your employees and their need for retirement security. Sure, you need to “dot your i’s and cross your t’s,” distribute documents in a timely manner and follow compliance. But what your employees really need is education, investment support, and personal retirement planning guidance. The benefit to you is to provide your employees with a way to gracefully retire with dignity, while you are able to transition your workforce into younger, less costly workers. This is the same reason pension plans were initially created.

Today, the hot topics of 401(k) plans seems to be more on regulation so Chapter 3 will review your fiduciary requirements and compliance. And while these details (fair and reasonable fees, suitable investments, disclosure and transparency) are all very important, a great plan – a successful plan - goes well beyond ERISA compliance. A plan which will enable your employees to get to a successful retirement requires diligent work, attention and creative efforts. If your advisory team helps you accomplish this, you are well on your way to great success.

Granted, a great 401(k) team is likely going to charge more than "average" fees (and they should because they are performing services that are far above average), but the costs pale when compared to the difference you can make for your employee’s financial future. So, while employers seem to be hung up on “low fees” in today’s regulatory world, the essence of ERISA compliance is to place your employees best interest first. Which is in their best interest: Getting to a successful retirement or paying the lowest fees? It is doubtful you will find a way to do both because training your employees to build a successful retirement requires a lot of proactive leadership. Some might argue lower fees translates into better investment performance, making retirement success more probable. Sure, in the absence of a great financial wellness program this may, in fact, be true. But as you read on, you will learn investment performance is only one of many hurdles we must overcome to help your employees achieve retirement success. Even more than that, they need to learn how to overcome their own self-imposed restrictions. I emphatically declare lower fees will not save America’s retirement system. Only a comprehensive financial wellness program that focuses on employee’s needs will save our national retirement crisis. Fair and reasonable fees are only one of many issues, and in the grand scheme, splitting hairs over 0.10% or 0.25% is compromising the real need for American workers. Today, fees have been compressed to the point of forcing professionals to cut services, which is totally contrary to what we need. We need to increase services in order help workers Retire Ready!

In our final phase of life, we don’t want to get up by an alarm clock or lose sleep over money. We want to enjoy time with our family, friends and pursue hobbies and dreams. Most people in their 80s no longer identify themselves as an “Engineer” or “HR Manager” or “Quality Control Supervisor.” They are proud grandparents, golfers, gardeners, bridge players, etc. If you are the employer who helps lead your employees to enjoy a comfortable retirement you are showing a level of regard for your employees that transcends the job and surpasses company profits. You are the champion!

Retire Ready is about taking a different approach to your 401(k). It’s written for the business owner or employer who wants to make a difference for his or her own business and for the most valuable asset you have – your employees.