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retirement access

What’s missing from retirement planning? Oftentimes, it’s access

June 13, 2023

Nearly half of all working-age baby boomers do not own a retirement account, despite that age group being near retirement. And baby boomers are actually the highest percentage of retirement-account holders among any group segmented in a 2021 survey by the U.S. Census Bureau

This lack of retirement planning by large segments of employees is leading to more stress for them and less productivity at work. Keep reading to learn more about the causes and potential solutions so you can do more to support your employees. 

The importance of a retirement plan

Do you know what the average amount of savings for retirement should be? A ballpark estimate is to save 10 times your annual income if retiring by 67. If you’re relying on only Social Security, the average retirement benefit per month is $1,782, or $21,384 a year. 

Your employees feeling confident in their retirement planning is also important to your bottom line. Four-fifths of employers say that employee financial stress is reducing workplace performance. This can be estimated to cost half a trillion dollars! 

Being prepared for retirement is crucial for every employee, and giving access to retirement accounts to employees is crucial for employers. Here are some of the top reasons employees should have retirement access:

  • Financial security.
  • Longevity such as overall longer life expectancy.
  • Independence to make your own decisions in your retirement.
  • Peace of mind.
  • Inflation and raising costs.
  • Unexpected expenses such as emergencies. 

Employees have to plan extensively to be able to enjoy those retirement years. The average 65-year-old couple is estimated to need more than $350,000 to cover healthcare costs alone in retirement. Because of inflation, this number will likely rise.  Expecting the unexpected is needed for retirement.

Access to retirement accounts is a problem

Here are some good statistics to paint the picture: 

  • 48% of American private sector employees ages 18 to 64 work for an employer that does not offer either a traditional pension or retirement savings plan.
  • 78% of workers at companies with fewer than 10 employees and 65% who work in companies with 10 to 24 employees lack access to a plan. 
  • For employers with more than 1,000 workers, one-third of employees don’t have access to an employer-sponsored retirement plan. 

There are several reasons why employers do not provide retirement access to their employees, such as cost, administrative complexity, and more. Many companies with young or transient employees may also  perceive less demand or interest in retirement plans. 

Education level influences access

Employees’ education history also affects their retirement account access. For example, retirement account access is unavailable for:

  • Three-quarters of workers with less than a high school degree.
  • One-half of workers with some college degree.
  • One-third with a bachelor’s degree or higher.

Employees with lower levels of education often work lower-wage jobs that don’t offer these benefits. The average earning for an employee with less than a high school degree is $32,188 per year. This could also contribute to less job security. Employees with higher levels of education have access and are more likely to work for larger corporations, which gives higher probability of retirement access. 

Giving employees access to retirement benefits and accounts can increase these stats. This can also improve the company through: 

  • Higher attraction and retention
  • Tax advantages
  • Employee satisfaction and loyalty
  • Improved employee morale

What can you do to give retirement access to your employees?

There are many ways you can support your employees for retirement. First, offer retirement plans. This could be an HSA, 401(k), IRA, and more. This allows employees to contribute a portion of their salary towards retirement, with an option for employers to match a portion of those contributions. 

HSAs are booming in popularity, with total assets eclipsing $104 billion in 2022. HSAs also have comparable or better perks than a 401 (k) or IRA with respect to healthcare costs. Including multiple retirement plans for employees can help them decide what is best for them, and give them flexibility. One-quarter of HSA participants in recent studies say they save money in an HSA to prepare for retirement. Let’s look at some perks of having an HSA option for employees:

  • Withdrawals for HSA eligible medical expenses are tax-free.
  • HSA funds carry over year by year.
  • HSA contributions reduce taxable income.
  • HSA funds can be invested, and earning through investment accumulates tax free. 

Once there is retirement access to your employees, educate and communicate with them. Giving employees education and resources for these plans can help employees understand their benefits and retirement planning. Here are some ideas:

  • Workshops
  • Online resources
  • Personalized guidance
  • Information emails

It is also important for employers to consult with retirement plan experts, legal advisors, and financial professionals to ensure compliance with relevant regulations and to tailor retirement benefits to their specific workforce and organizational needs. 

Would you like to learn more about how you can transform retirement planning at your company? Download your guide today!

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