It is hard not to hear about the pending doom and gloom forecast for the baby boomers approaching retirement.
I was standing in line waiting to pick up my rental car last week and the flat screen TV on the wall had CNN reporting about how boomers “don’t even know what they are going to end up doing” since many are unprepared to face retirement and that Social Security and Medicare may fail as a safety net for the boomers.
The irony is that I was on my way to facilitate a workshop on Retirement Readiness for a company that is proactively preparing their workforce to have a financially secure retirement, bucking the trend of many employers who are putting more of the burden on the workers to save for their own retirement. So what is the answer to having your employees take charge of their own futures and focus on building a sizeable retirement nest egg?
Only 15% confident about meeting retirement goals
Well, for starters, we need to understand what’s going on within the workforce and identify their vulnerabilities.
Based on our own primary research in Q1 of 2011, employees of virtually all income levels and all ages reported that retirement was their top financial priority, but only 15 percent of them were confident that they are on track to meet their retirement goals. This is among the lowest retirement confidence levels Financial Finesse has ever recorded, down from 18 percent in Q4 2010. And how can they be confident about their future when two-thirds of employees admit they have never even run a retirement estimate calculation to see if they are on track?
The first step to retirement preparedness is to identify those employees who are not on track, based on their current retirement account balance and accrued pension benefit, if any.
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Education interactions drive more savings
The company I had visited last week actually mailed out a retirement projection to all of their hourly employees, and followed up the mailing with an on-site workshop that explained what the projections meant and strategies to get on track for those employees not hitting the 80 percent replacement target.
Taking that even one step further, each employee that is in danger of being unprepared for retirement should be offered the ability to sit down one on one with a Certified Financial Planner, who can chart an action plan to minimize the obstacles that are preventing them to save for retirement, such as high debt or monthly expenses.
A recent behavioral change study Financial Finesse conducted found that employees saved on average 11 percent of their income — over twice the national average — in their 401(k) plans when they had five or more interactions with retirement education programs like those I’ve mentioned above.
This was originally published on the Financial Finesse blog for Workplace Financial Planning and Education.