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Are Employers Responsible for Helping Employees Prepare for Retirement?

Are Employers Responsible for Helping Employees Prepare for Retirement?

September 09, 2019

Your employees, both past and present, have helped propel your company to success through hard work and long hours. When the time comes for them to step away from the job, will they have had access to resources to properly prepare for retirement? If you’re a small-business owner or executive within a major corporation, you bear a certain level of responsibility in ensuring that your employees are prepared for retirement.

There are many challenges facing workers who are trying to save for retirement. Workers feel strained by the expenses of daily living and struggle to contribute to their retirement. According to the Employee Benefit Research Institute, 73% of workers who are currently not saving for retirement report that they would be more likely to do so if their employer-provided a matching contribution. In the same report, 66% of respondents say they'd be more likely to save if their investments were automatically deducted from their paycheck.


Offer a good Retirement Plan and Educate employees in their transition

The answer is not simply throwing more money at employees. The best solution is giving workers the tools and support they need to make smart decisions with their retirement savings. By offering your employees valuable financial education, you can enhance their ability to manage money well and make strategic decisions concerning retirement.

There are several retirement options available for your employees between company-funded options and private plans. The following are just a few plans that your employees should know of:

401(k): Earnings grow tax-deferred over time, but income taxes must be paid in the future when withdrawals are made from the account. The private-sector cousin of an employer-funded 401(k) is a traditional IRA. Employers make matching contributions to 401(k) plans, but not to private IRA plans.

Roth 401(k): Contributions to this type of plan are made with after-tax dollars, which means withdrawals made in the future are tax-free. The private-sector cousin of a Roth 401(k) is a Roth IRA. Again, employers often make matching contributions to a Roth 401(k), but not a Roth IRA.

403(b): Contributions are made with pre-tax dollars, and earnings grow tax-deferred over time. Most employers do not make matching contributions to 403(b) plans. Employees working less than 20 hours per week may be excluded from these plans.

Providing your employees with educational resources on retirement is vital to make sure they understand retirement plan distribution options and the need for a backup plan if health issues, job loss, family obligations or other issues force them into retirement sooner than expected as well as the damage that plan leakage can do to their eventual retirement

The combination of matching contributions, educational programs, automatic enrollment, automatic escalation, as well as a focus on lowering costs and offering a solid investment lineup, helps employers play a more active role on behalf of their employees. With the enormous retirement planning challenge facing our country, we need all employers to take this issue head-on.


The views expressed are not necessarily the opinion of Social Advisors, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice.  Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.