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Retirement Education Isn’t Enough

By Steve Bates  6/27/2011
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LAS VEGAS—Don’t just give your employees retirement education, says Linda Robertson, CEBS. Give them broader financial education.

Robertson, a certified financial planner with Financial Finesse Inc., a Manhattan Beach, Calif., workplace financial planning firm, conducted a June 25, 2011, preconference workshop, “Workplace Retirement Education: One Size Fits All Is Extinct,” at the Society for Human Resource Management's (SHRM) 63rd Annual Conference & Exposition.

The session challenged attendees to be proactive with their employees to drive home the message that most of them don’t know enough about managing their finances in the short term or the long term.

“We’ve got to move away from traditional retirement education,” said Robertson. “That’s not going to improve their situation. … Bring general financial education into your retirement education.”

For years, retirement plan communication has been standardized, she noted. There has been a big shift in recent years toward customized programs that provide personal guidance. But that assistance must go beyond just the basic 401(k) plan, she said. Many U.S.-based employees don’t have an account or don’t think that they need one; many aren’t saving enough in their accounts; and many don’t have a good grasp of their overall financial situation and strategy.

Customization requires different approaches for different generations, said Robertson. Many young people say that they will start thinking about a retirement savings plan after they get settled with a home and perhaps a family, but workers under 30 are the ones who stand to gain the most by starting to save now.

However, it is Generation X (people in their 30s and early 40s) who are under the most financial stress of any age group and are among the hardest to persuade to consider their overall financial futures. Often living paycheck to paycheck while dreading the prospect of paying for their children’s college educations as well as saving for retirement, they think: “I can never catch up, so I’m not even going to bother,” Robertson noted.

The messaging isn’t just a question of age. “Women are under much more financial stress than men,” she said. And, regardless of gender, “Many employees don’t even have a couple hundred dollars in an emergency fund.”

That explains why many employees seek to withdraw funds from their limited 401(k) savings. And once those withdrawals begin, they tend to be repeated.

On top of that, fewer Americans “are even trying to determine if they are on track” to have enough money saved for a comfortable retirement. And employees usually underestimate the cost of health care in retirement. Robertson said that when she tells workers how much more they will need for health insurance than they expect, “You should see their jaws drop.”

But HR professionals can help employees gain the knowledge they need to take control of their finances today and for the future, she noted.

Run the numbers on each employee to determine how close he or she is to being on track for retirement. “Show that on a total rewards statement.”

Offer budgeting classes, emphasizing money management skills, particularly for employees who are in debt. “A lot of EAPs have financial counseling as a service.”

Consider requiring financial education for employees who apply to withdraw money from their retirement accounts. “Check in with your plan provider to see if they have this kind of gate.”

Provide customized messages by generation and gender. “Women learn differently than men. Word of mouth can help.”

“Try to get the attention of your employees” any way you can, Robertson said. “Get in their face.”

Steve Bates is manager, online editorial content, for SHRM.

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