If it's Free, it's for Me: A 401(k) tip from my Dad to you
If you can remember a time before Netflix, Hulu, and You Tube, we had these things called "movie stores."
For those of you not familiar with the term or if you never had an opportunity to visit such a treasure, I'll be honest with you...I'm a little jealous.
It's hard for me to imagine that this was the process of watching a movie at home:
- get in the car,
- drive to the store,
- park the car,
- search for a movie,
- risk having to interact with people,
- pay for the movie,
- get back in the car
- drive home*
- *drive to Dairy Queen
- now drive home
- pop the corn,
- pop the movie in,
- start the movie,
- DVD disc is scratched,
I'm pretty sure if I had to do this every time I wanted to watch an episode of Chicago Fire that my wife and I missed, I would lose my mind.
Heck, I never would have watched a 33 minute documentary about a spicy condiment if I had to interact with another human being out of an irrational fear of being judged by some high school (but judge away, Sriracha is fantastic, both the condiment and the film).
Nonetheless, growing up in my hometown, there was a movie store that would advertise their ability to ensure enough copies of all new release movies so people wouldn't hesitate to visit their establishment over another.
Their promise to people was that, if the movie was in fact "sold out" at the time when you wanted to rent it, you would get a voucher for a free rental on that specific movie at a later date.
Since my dad never passes up a good deal, he would regularly go through the new release section to cash in on the movie store's "free rental" policy.
No matter what movie it was, it didn't matter...the only thing that mattered was that he received something of value without any additional expenditure - not including that detour to Dairy Queen.
Are your employees leaving money on the table?
"If it's free, it's for me" has been my dad's motto for years - that same advice should be taken seriously by your employees regarding the 401(k) employer match.
Most likely, your employees may in fact be leaving money on the table, according to the American Benefits Council. Their study found that, in about 66% of the respondents, at least half of their employees were maximizing their match.
That still left a) 50% of that group, the employees were not maximizing the company match and b) 34% of the other respondents had less than 50% of of their company match. That's a lot of free money on the table!
One would hope that any employee that is saving in their 401(k) - if not everyone in the company - would want to take advantage of the entire amount of the employer contribution.
What can you do as a plan sponsor to have your employees get the most out of the plan?
Holistic Plan Review:
Instead of using the annual plan review as a box to check off your compliance list, work with your retirement plan advisor to dive deeper into what all the numbers & charts are showing you.
Don't assume your workers in third shift are not maximizing the match because you feel they may not be able to afford saving up to the full amount.
It may be because they have never been offered an education meeting that worked in their schedule or because they don't sit behind a desk with a computer that allows for electronic reminders.
That's exactly what happened with a large manufacturing firm in the Midwest; the deep dive helped the third shift employees save more for retirement and subsequently, improved employee satisfaction.
Regular & Consistent Communication:
It may not be physically possible to hold monthly meetings for your employees about the retirement plan, but having reminders or some sort of communication about the benefit is certainly manageable.
Leverage your retirement plan advisor to set up this type of communication campaign without having to reinvent the wheel or increase an already heavy workload for your HR staff.
Taking your regular communication and education campaign to the next level by seeing how you can address different topics across different demographics.
It doesn't make sense to send a 25 year old instructions on how to enroll in Medicare at age 65 but it might make sense to send information about that to people within 5 or 10 years of that age.
Visual and Interactive Aides
Here is a resource that you can share with your employees that's simple and easy:
Not very many people have determined how much they may need in retirement, but you can encourage them to do so by using this tool.
They are are going to see that it makes a whole lot of sense to put as much as they can into savings by not missing out on free money!
Whether it's a free video rental or money to save for your retirement, take my dad's advice and make sure to take advantage whenever you can:
What do you think? Are there other ways that have worked for you in the past that have helped people ensure they are at least maxing out employer contributions?