I have worked in the retirement industry for most of my career. Throughout the years there have been many changes to retirement plan offerings, plan design, plan investment menus, web technology and employee education materials. The one thing that has been a constant throughout, is the participant’s desire to retire with enough money to meet their lifestyle goals and for it to last their entire lifetime. Our industry has looked at employees – or participants, through a “Retirement Focused Lens”. The education materials, web tools and participant enrollment meetings focused on the retirement ‘plan participant’ – not the individual, each with their own unique financial needs and circumstances.

Today with a click of a mouse or a quick search on Google, you can find report after report about the rise in household debt, specifically credit card and student loan debt. The typical household is carrying over $16,550 in credit card debt and $49,900 in student loan debt (Nerdwallet 2016 American Household Credit Card Debt Study). This debt burden has a significant negative impact on employees, such as difficulty in meeting household expenses, greater use of credit cards to pay monthly expenses, more likely to be stressed and distracted at work and more likely to raid retirement funds to pay expenses.

A study by PwC found that after years of improvement, we are now seeing a downward trend in employee financial wellness.   Large increases in difficulty managing cash and debt are felt, but differently by each generation. A larger percentage of Millennials found it difficult to meet their household expenses each month, whereas a larger percentage of Baby Boomers consistently carry a revolving credit balance and find it difficult to make their minimum credit card payment. Unfortunately all generations and income levels are using credit cards to pay for necessities they can’t afford otherwise.

Due to these trends, “Financial Wellness” programs are being reviewed and adopted more and more each year. At Unified Trust, we believe any commitment by an employer to improve the overall financial wellness of their employees is a beneficial initiative. However, not every employer is able to institute such a program, either due to lack of financial or personnel resources or other business reasons. But we believe every employer can help their participants achieve financial wellness, by providing them a proactive retirement solution which is personalized, holistic, and provides on-going progress reports to the participant. This solution should:

  • Provide an illustration on how much monthly income all their savings can provide in retirement
  • Establish a goal of how much monthly income they will need to meet their long-term retirement goals and provide them a solution whereby their money is managed throughout their career to meet their objectives
  • Identify whether the participant has a surplus or deficit (monthly income vs monthly need)
  • If a participant is not on track to meet their retirement income objectives, communicate how much the participant will need to save to achieve retirement success, and how much that increased deferral rate will impact the participant’s paycheck

Remember the participants are facing short term financial demands on their money, therefore when participants hear us say over and over in meetings, flyers and enrollment materials; “Start saving early,” “Try to save at least 10%,” “You should at least save enough to get the full match.” Studies show participants feel overwhelmed and sometimes ashamed for not doing what clearly we say they should be doing. We are asking them to give up the need to reduce financial stress, for a long term benefit they cannot begin to understand or more importantly quantify. To produce successful participant outcomes, we must provide them answers to the following questions:

  • How much monthly income do all my assets today provide me in monthly retirement income?
  • How much money I will need monthly in retirement to meet my lifestyle needs?
  • When can I retire and be comfortable?

Most importantly, we cannot expect or ask the participant to do all the heavy lifting. Most participants we’ve met would acknowledge that they are not trained to be a financial planner, investment manager, asset allocator, actuary or an investment analyst.   This is the expertise that we, the providers and advisors should be delivering.

So if you want to learn more about a holistic retirement solution that answers those questions for your participants and puts them on a pathway to a successful retirement give us a call. You can reach us at 866-680-7000.

About Monika Hubbard view all posts

Monika Hubbard is an Institutional Retirement Consultant for Unified Trust Company. As an experienced employee benefits professional, Monika is a frequent lecturer on retirement plan design matters, fiduciary issues and industry trends.