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Opinion: Workplace education fosters retirement readiness

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Recent data suggest that many workers aren’t financially prepared for retirement, but employers can help improve the statistics.

The 2010 401(k) Benchmarking Survey, released jointly by Deloitte and the International Foundation of Employee Benefit Plans, reports that only 15 percent of employers surveyed believe most employees will be financially prepared to retire. The 2010 Retirement Confidence Survey, published by the Employee Benefit Research Institute, reports that only 16 percent of workers feel very confident about having enough money for a comfortable retirement.

The only good news about these findings is that employers and employees agree in their outlooks about retirement preparation.

While these studies highlight a problem that is a hot topic in the media, in Washington and in homes nationwide, employers may be in the best position to significantly impact retirement financial readiness for employees.

Progressive employers are now expanding traditional workplace wellness programs to include financial wellness.

The 2010 Retirement Confidence Survey found that employees are most likely to express confidence in private employers and least likely to feel confidence in the federal government, making the workplace a natural environment for employees to receive information, education and advice about financial planning for retirement.

Congress paved the way by enacting the Pension Protection Act of 2006 and defining the rules under which plan sponsors can provide education and advice to participants without incurring additional liability.

What workers need to know
The Retirement Confidence Survey found that 46 percent of workers have tried to calculate how much money they will need to have saved by the time they retire to live comfortably. While this number is surprisingly low, what is even more shocking is that it is lower than the 53 percent that reported attempting calculations in the 2000 edition of the survey.

With the increased availability of online retirement calculators and an aging population, that percentage should be increasing..

A key component to retirement education is making sure plan participants really understand the consequences of their actions – or lack of action – when it comes to their retirement plans.

The 401(k) Benchmarking Survey reports that the most common actions taken by participants in their retirement plans in the past 12 months were increased loan activity, decreased deferral rates, and increased hardship and in-service withdrawals.

While 39 percent of plan sponsors indicate they offer a Roth 401(k) option to, only 5 percent of their participants are using this feature. All of these issues have tax implications that make them more difficult to understand without proper guidance and education.

Retirement planning curriculum
It doesn’t have to be difficult to incorporate retirement planning education and advice in the workplace. Here are three easy steps for employers to get started.

• Evaluate annually retirement plan participation rates, deferral rates and investment diversification statistics by both participant age and gender. This evaluation will provide clues about areas that need improvement and a starting point for determining which education and advice programs are needed.

• Offer information in multiple formats – face-to-face, in print and online.

• Incorporate general financial topics such as budgeting, cash-flow analysis and debt- reduction strategies that provide an overall financial literacy benefit to employees.

Offering financial educational opportunities in the workplace helps to differentiate an employers’ overall benefits package and, shows concern for employees’ present and future financial well-being.

Robin Robeson is a certified trust and financial adviser at Springfield-based Pension Consultants Inc., where she helps employers create retirement education programs and provides retirement investment guidance. She may be reached at[[In-content Ad]]


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