Helping Workers Prepared for Retirement

Question: We have a large percentage of employees who are within 10-15 years from retirement. These employees have been with us for most or all of their careers. We want to help them prepare for retirement and better understand their defined benefit and 401k plans. What type of financial education could benefit these employees?

Answer: A financial education program can be designed with a specific focus on helping your pre-retirees become more knowledgeable about their benefits, as well as retirement planning in general.

Employees who are within 10-15 years of retirement are at a critical point in their lives, where they may have just enough years left to catch up on savings, if needed. The key is to help employees determine if they need to catch up or if they are likely to reach their retirement goals based on their additional 401k savings and projected pension benefit. While there are numerous financial calculators available on the Internet or through your plan provider, they only go so far. We recommend the use of calculators in conjunction with more comprehensive retirement planning through consultations and live workshops with an unbiased financial planner.

• Offer group workshops geared specifically toward this employee population for an effective way to raise awareness of the retirement plans and get employees thinking about their retirement on the horizon. Instead of just focusing on the investment choices in the 401k, it is beneficial to put retirement investing in the context of what it really means for someone planning to retire in the next 10-15 years. Calculators can be used throughout the workshop presentation to stress the importance of achieving an adequate rate of return that will allow retirement contributions to grow. It is also valuable to show how a retirement nest egg grows based on different rate of return assumptions.
• Employees should also be educated on how to determine their risk tolerance, how their risk tolerance should influence their investment choices, and how that affects the investment return that is realistic to use for their retirement projections. Give employees access to one-on-one consultations where they can discuss their risk tolerance and review their asset allocation with an unbiased financial planner who is not tied to your specific retirement plan investments.
• Most employees we have worked with who are close to retirement are anxious to run their own numbers to see if they are on track or if they have a projected shortfall. Integrate a retirement savings calculator into the workshop presentation, and then give employees access to the same tool to use on their own and/or in a one-on-one consultation with a financial planner. If employees need to increase their deferral rate to reach their goal, the calculator can show them how much additional savings they need, and they will be able to see how the benefits you are providing can go a long way in towards helping them achieve their retirement dream.

Visit the archive of past "Questions and Answers."

About Financial Finesse: Financial Finesse is a full-service unbiased financial education company that works with Plan Sponsors and Plan Advisors to design company and plan-specific financial education programs that address the gamut of plan participant and business needs. Our award winning financial content is delivered in multiple formats: live, online, telephone, and through financial planning kits. If you are interested in learning more about workplace financial education programs, contact one of our education consultants at AskFF@financialfinesse.com.

The Ask Financial Finesse Q&A service is designed to provide general information on trends and developments in workplace financial education programs and participant education strategies. Due to the complex nature of financial benefits and/or workplace financial issues, the information contained in this document is not to be construed as advice. If you have questions about your specific situation, you, may want to contact a financial education consultant. Due to volume, Financial Finesse will be unable to answer all submitted questions.