What is the place of a Retirement Plan when looking at Financial Wellness?
When we think of wellness or well-being, we think of the state of being comfortable, healthy or happy. Most people are constantly striving toward the goal of well-being. But what are the components of well-being, and how can we make it easier to attain that goal? How does this translate to you and your employees? As an employer, you have a unique responsibility as it relates to your employees' financial wellness. It could easily be argued that every employer has an employee financial wellness program in place, regardless of whether or not they know it. It is important that you at least participate or better yet, guide the conversation around the financial wellness of your employees, as it is taking place already.
There are five basic components to well-being:
1. Career. Having a meaningful role that uses your strengths.
2. Social. Having people with whom to socialize and share your life.
3. Finances. Establishing a strong base which will reduce worry, allow you to enjoy experiences and share with others.
4. Physical. Exercising to keep the mind and body healthy. Eating and sleeping well.
5. Community. Participating in community events to fulfill personal missions or passions.
Employers and business owners should concern themselves with the personal financial well-being of their employees, because a person in a high state of wellness will have fewer sick days, and better productivity than someone in a precarious state of wellness.
In a 2015 J. P. Morgan research study, 74% of employers feel some responsibility for helping their employees achieve a financially secure retirement. A similar number, 75% of employees, think that the employer has at least some responsibility for helping them save for retirement. The study found also that 82% of employees think that their employer should encourage saving in the company retirement plan, and 41% want their employer to notify them if they aren’t saving enough for retirement. Download the Study here.
Retirement plans are an important part of financial wellness. Often, however, people get stuck in a cycle of financial instability before they have the opportunity to save for their retirement. In order to be capable of financial wellness, a person needs to take a few basic steps:
1. Spend less than you make. The first step!
2. Manage credit. Medical debt can play a big part in being stuck in a cycle of credit problems. Having good medical insurance coverage is one way that employers can help employees avoid many of these challenges.
3. Establish an emergency fund. The rule of thumb is to have 3-months’ worth of expenses available in a liquid account that can be used in the case of emergency
4. Retirement savings. People are 15 times more likely to save for retirement if they are offered a plan at work. This is according to the Employee Benefit Research Institute.
5. Other financial goals. You may wish to help a church or charity, help the grandkids with college, buy a second home, or any of a variety of things.
Business owners should concern themselves with the financial wellness of their employees. Offering a retirement plan like a 401(k) plan with the simplicity of payroll deduction will allow employees who might otherwise be in a risky financial position to become more financially secure. Before they know it they will have several hundred or several thousand dollars put away that they never would have saved on their own.
Financially healthy employees are productive employees. If you value your employees, and you want to help them find financial wellness, contact us today to discuss the options for establishing a plan for your company. See our other blog posts on How to Start a 401k plan, or Small Business Retirement Plans for more information.
If you don't yet have a retirement plan in place, know that your employees know that and have feelings about that. One of the best ways to keep loyal employees happy is to make sure they are taken care of and have a sense of financial wellness. This includes planning for retirement, so please take the first step in guiding that conversation by learning what you can about how to set up a 401k. You can request a proposal if you are ready to get started.