The importance of saving through employer-sponsored retirement plans cannot be understated in today’s economy. Pension plans are on the way out, and the financial future of Social Security is suspect. Workers will need to rely heavily on 401(k), 403(b), and similar types of employer-sponsored plans that offer current tax savings and deferrals to fund a comfortable retirement.
Employers recognize the importance of their plans, and have been taking steps to help their employees understand how to use them effectively. A positive trend to emerge from their outreach is the role of financial education in this process. The International Foundation of Employee Benefit Plans found that 43% of U.S. companies now offer financial education at work. The education process has moved beyond retirement calculators to include personal finance matters, such as debt, budgeting, and spending. While these are not direct retirement issues, they strongly impact an individual’s ability to save for retirement, and therefore, are very constructive.
Employers are finding that financial education can provide benefits beyond helping their workers plan for retirement. Financial Education and Literacy Advisers reported: “American workers spend an average of 28 hours a month researching personal financial issues. This lost productivity across an organization can be translated into real dollars—as much as $5,000 per employee per year.”
Some employers have taken financial education one step further by offering their workers one-on-one meetings to discuss individual circumstances. A study by The Principal Financial Group found these meetings have a tremendous impact, and give the worker greater confidence that the decisions they are making are the right ones. Among employees who attended a one-on-one session in 2011, 92% agreed to take certain positive steps and 80% followed through with those steps.
Financial education may not be able to solve the retirement savings gap completely, but it is a huge step in the right direction. Employers providing this resource are offering a meaningful benefit to their employees.