You can lead a horse to water…

As a parent of two teen-age children, my husband and I often wonder if we are doing enough as parents. We provide guidance & unconditional love, express expectations, and stay actively involved in their lives to help shape them into successful young adults.   I have learned I can positively influence my children but I cannot always make decisions or force them to do the right thing. Over the course of the years I can only imagine the number of times I have said “put your dishes in the dishwasher” or “clean your room”.

Doing the right thing or taking appropriate action isn’t easy. There are so many excuses to use… not enough time, peer pressure or I’m too tired are some of the more frequent ones in our family’s repertoire.

Employers often face the same challenges with employee participation in a retirement plan. Common excuses range from not being able to afford it, not knowing how much to save and/or where to invest, or thinking they have plenty of time to save later in their career.

As a parent, while I cannot make all decisions for my children, I can set a path and provide them with the resources for more success and achievement.   The same can apply to you as an employer. While you cannot force your employees to save for their retirement you can provide the tools and resources to help set them on a path for financial independence in retirement.

The idea of saving for your own retirement has been a shift over the generations. In the past Social Security and plan sponsored defined benefit plans were to provide adequate income through the retirement years. In today’s world that has largely shifted to defined contribution such as a 401(k) plan. Just because there has been a shift doesn’t mean that the onus needs to fall squarely on the participant.   In fact, many plan sponsors agree that this should be a joint effort. Nearly two-thirds of plan sponsors say they measure the success of their retirement plan by its effectiveness in getting participants on track to a more successful retirement.  (Retirement Advisor Council Study, “Value of a Professional Retirement Plan Advisor,” February 2014).

Methods that can be used to help lead to more positive participant outcomes include:

  • impactful participant education campaigns focusing on the importance of saving and investing
  • simplified enrollment strategies and use of qualified default investment alternatives
  • plan design features such as automatic enrollment or providing a matching contribution to help

The question employers should ask themselves is what is their goal to help employees retire when they want versus a later retirement age or never retiring?

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The subject matter in this communication is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice.  You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. 
Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.