Investment education relieves employee stress

Many employees also are unprepared to manage investments in a 401(k) plan offered by their employers, and this also will affect long-term financial security.

In a recent survey conducted by the Employee Benefit Research Institute, just 23 percent of 1,000 employees surveyed said that they received retirement investment advice through their employers.

Financial education

Businesses, however, are beginning to recognize the importance of financial education, and more are making it available to employees.

Like wellness, day-care and other assistance programs offered by employers, financial education can be an important tool to motivate employees toward higher productivity and to foster loyalty. It also will help employees to understand and meet their retirement savings needs.

Today’s employees usually expect their benefit packages to include some sort of retirement plan – such plans have almost become a necessity for attracting and retaining quality employees.

With the future of Social Security in question, people are worried about their financial security in retirement and need a simple tax-advantaged way to save.

Just providing a retirement plan won’t solve the problem completely. Some employees may be reluctant to participate in a retirement plan because they don’t understand the benefits of participation or they are procrastinators when it comes to saving for the future.

Many employees who do participate may underestimate the amount they should contribute, and they may feel insecure about their investment decisions.

Though offering an employer-sponsored retirement plan is a valuable first step, employees are likely to need additional tools – and the education to use them – to meet their retirement goals.

At the least, employers should help employees understand the features of the retirement plan offered, discuss general financial information and provide investment information. Asset allocation models and interactive investment materials also may be helpful.

Business returns

Helping employees understand benefits could provide some positive returns for business.

Improving employees’ understanding of the plan and available investments will encourage participation. Also, if the employees are less distracted by their personal financial challenges, they will be more focused on their jobs.

Education has proved to be an effective way to improve employees’ financial management abilities. After receiving financial education, many employees are able to make better financial decisions with more confidence.

If the result is improved performance at work, both the employee and the employer win.

Timothy M. Reese is senior vice president-investments, with A.G. Edwards & Sons Inc. Member SIPC. He can be reached at timothy.reese@agedwards.com.[[In-content Ad]]