Why Your Retirement Plan for Employees Is Falling Short

February 15, 2017 · Written By Deborah A. Stiger, CPA/PFS, CRPS®, AIF®

Is your retirement plan for employees falling short?  Is your participation rate stagnant?  Is your HR department besieged by questions that deserve the attention of an experienced financial advisor?

If so, you’re not alone… A lot of companies are failing to engage people in the retirement planning process—or else failing to deliver the proper resources and education when employees raise their hands for help.  Consider these stats from the Society of Human Resource Management:

  • 52% of U.S. employees surveyed say they don’t have the time, the interest, or the knowledge to manage their 401(k).
  • 56% do not review the plan-related materials they receive.
  • 83% would like to receive professional investment management advice via their employer[i].


1. How to define retirement goals

Right now many working Americans are simply estimating how much they’ll need to save, without looking at concrete numbers and lifestyle expectations. According to a 2015 survey cited in The Wall Street Journal, respondents ages 55 to 64 said they expected to have about $45,000 in annual retirement income.  But the amount they had saved would only provide an estimated $9,129—a potential $36,371 gap.

If your employees lack a clear sense of where they need to be, and where they actually are right now, the whole process of retirement savings begins to feel abstract.  It makes it easier to put off plan enrollment, or continue to make inadequate contributions.

2. How to save more

Let’s face it—money that isn’t otherwise diverted gets spent.  Regardless of how well-off your employees and their families are, they will find ways to use the “disposable” income that isn’t automatically channeled into a 401(k), a 529 plan, an emergency savings fund, etc.

Employers that provide educational sessions on debt management, college savings, and household budgeting can make a big difference in helping their teams prepare.  Likewise, automation features can be used to help employees save more—so long as you educate people about default contribution percentages.  In some cases, it might make sense to offer automatic enrollment and automatic escalation on the default contribution percentage.

3. How to maximize Social Security and Medicare benefits

Most Americans don’t understand the different claiming strategies or timing factors that affect their Social Security benefits.  And it’s no wonder.  While the original Social Security Act of 1935 was 29 pages long, the current version requires nearly 2,600 printed pages.  Some workers (50% of Gen Xers and 51% of Millennials, according to Pew survey data) don’t even have faith these benefits will still exist when they’re ready to retire.

Still, for older workers,  it’s important to provide some informational content on Social Security:  individual, spousal, and survivor benefits—in terms of application timelines, collection methods, and taxation strategies.  Helping them prepare early for a phased retirement or a planned exit is beneficial to your organization as well, as it facilitates succession planning, recruitment efforts, etc.

The rising cost of healthcare is another growing concern.  Gaps in the Medicare program mean today’s families need to have a solid plan in place.  Companies should work with a retirement plan provider who can help employees answer questions like:  Have I budgeted enough for deductibles, co-pays, and premiums?  How will I afford long-term care?  Do I have the right types and levels of insurance?

Bottom line: educating employees is more than just your fiduciary responsibility as a plan sponsor.  It’s also a smart way to attract and retain the very best talent.  If you think your retirement plan design (or your plan provider) has room for improvement, feel free to contact our Business Retirement Plan Specialist for a fresh perspective.

[i] https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/401kmaterialsunread.aspx