401(k) Specialist Issue 2 - 2024 - 36

401(k) STRATEGIES
3 Ways Financial Education Empowers Plan
Sponsors and Employees at All Levels
By Jeremy France
TODAY, EMPLOYEES ARE increasingly
turning to their employers for financial
help. Our research shows retirement preparation
assistance is the top workplace benefits
choice among employees, followed by
help with financial planning and goalsbased
retirement investment planning.1
Employers and plan sponsors must find
a way to meet increasing demand for help
from employees at all levels as they navigate
diverse circumstances, plan features,
and goals-whether it's saving while paying
off debt, budgeting for a health condition in
retirement, or factoring in Social Security,
health insurance, and disability. Considerations
like these should have a powerful
impact on how individuals think about
investing in a company retirement plan. Educated
employees will make better choices
and optimize their menu selection, resulting
in a more balanced financial future.
As many workers continue to struggle to
save and invest enough to build financial
security for their golden years, the financial
education gaps among employees deserve
more attention. Let's walk through three
key benefits participant education can add
to your retirement program:
Driving Financial Outcomes
When it comes to retirement plans, it's
not necessarily true that if you build it, they
will come: A more hands-on approach is
needed to educate and engage employees.
Retirement vehicles-from pensions to
401(k)s and other defined contribution
plans, to state-sponsored IRAs-are all
meant to help position employees for retirement.
But what does that look like? Pew
Charitable Trusts has identified a target
retirement " income replacement " level of
75% of the average income earned between
ages 45-64, simply to maintain quality of
life and avoid economical vulnerability.2
36
ISSUE 2 2024 | 401kSpecialist.com
This requires careful preparation, and
while many employees are trying to better
manage their financial planning, they may
not know how.
It's critical for plan providers, recordkeepers,
and financial advisors to work
together to help individuals navigate
retirement planning. Cementing a more
comprehensive fund lineup is foundational,
but it's just the beginning. The real test lies
in educating employees on how to make
the most of the tools and choices available
through their plans.
In fact, we're seeing that consistent financial
education not only helps retirement
plan participants, but also leads to more
positive outcomes for plan sponsors-such
as stronger relationships with employees,
lower attrition, higher enrollment rates (especially
for those without a default auto-enroll
feature), and higher contribution rates
from participants who enroll.1
Differentiating Retirement Programs
Many groups have been historically un " We're
seeing that
consistent financial
education not only
helps retirement
plan participants,
but also leads
to more positive
outcomes for plan
sponsors. "
derserved in terms of financial and retirement
benefits education. A more holistic
approach to education requires understanding
employees' life stages, community
concerns, and overall financial journey.
Individual needs are different, requiring
a comprehensive range of materials and
support to meet employees wherever they
are today. To drive engagement, it's great to
have access to human professionals such
as financial advisors. Of course, that may
not always be possible amid tight budgets
and increasing employee demand-which
in turn places greater demands on plan
sponsors.
Part of the solution includes delivering
a robust digital library of content and
resources that can address various topics
while also defraying costs and delivering
scale. Plan sponsors can work closely with
plan providers, consultants, recordkeepers,
and financial advisors to deliver education
through digital newsletters, planning tools,
onsite seminars, one-on-one open office
hours, and pre-recorded webinars, videos
and articles. Variety allows employees to
mix and match their educational content
according to their individual situations. It is
becoming a key differentiator for organizations
to offer thoughtful resources for
a wide spectrum of employees, from entry-level
hires all the way up to the C-suite.
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401(k) Specialist Issue 2 - 2024

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