Helping Young Participants Save
As the student loan crisis intensifies and day-to-day financial challenges remain the norm for many, younger employees may find it increasingly tough to save for retirement, or even enroll in a retirement plan.
In such cases, employers can play an outsized role in improving financial health by incorporating tactics to drive interest for financial planning.
“What is most important is to know your audience, and it’s ‘different strokes for different folks,’” says Geraldine O’Brien, vice president of communications at Newport Group. “This is a job for your human resources [HR] professionals because they know their employees best, and they know the best way to connect with them.”
While the burden of student loans may be heightening debt for Millennials, causing some to avoid saving for retirement, automatic enrollment gives a helpful nudge to this group. O’Brien observes that many Millennials, once auto-enrolled, find they can actually afford to put at least a little away for retirement at the same time they reduce student debt.
Lisa Chui, vice president of finance and human resources at Ubiquity Retirement and Savings, considers auto-enroll as one of the best approaches to effective retirement saving. “The No. 1 way to get people to save for their retirement and to enroll into their program is to have an auto-enrollment feature, so an employee would have to opt out of the plan,” says Chui. “Even though it’s a small percentage—[a] 1%, 2% contribution—most of the time they will let it sit because they won’t see a huge decrease in their paycheck.”
Chui believes that adding an automatic deferral increase feature to augment auto-enrollment can also help participants accrue retirement savings. If an employee currently contributes 2% of his paycheck to retirement savings and the number automatically bumps up to 3% in the new year, most employees will fail to even notice the difference because of the small amount, Chui says.
For those employers who do not offer systemwide auto-enrollment, Chui advises, presentation, information and efficiency are key.
“You can always have it be sort of a manual auto-rollout; have the HR person present it as something you just need to do,” she says. “[He] must focus on making it easy and making sure there are no barriers to enrollment.”