Employers use retirement plans to help them recruit and retain the best employees. The best employers also use their retirement plans to help drive stronger employee engagement. When it comes to financial planning and retirement, businesses are operating in an increasingly dynamic environment.
Here are five trends that every employer needs to understand if you are going to keep your retirement plans competitive.
1. Financial Wellness
Many companies have added health and wellness programs to help their employees feel physically and mentally better. These programs can also help lower medical insurance costs. The next trend in this area is financial wellness programs.
Employees often need extra help managing their money and navigating a complex financial system. Financial wellness programs work best when they cover a variety of different needs, from basic budgeting to student loan management to retirement planning.
2. Model Portfolios
Employees are increasingly insecure about their ability to afford retirement. Much of this anxiety is connected with employees feeling uncertain about how to make the right investment selection for their situation.
Model portfolios are a way to give employees the benefits of working with a financial advisor without all of the costs. Model portfolio services provide employees a simple way to make diversified investments that are also calibrated to their risk tolerance. More and more employees want to make better investment choices but lack the necessary financial education and access to financial advisors.
Employers are providing model portfolios to help bridge this gap.
3. Planning for Market Corrections
Everyone knows that the stock market cannot go up indefinitely. Eventually, there will be a market correction, and perhaps a recession. A downward trending stock market can cause excess stress, especially in older workers.
Smart employers are proactively helping employees understand what they can do now to mitigate against the risk of significant market losses. For younger workers, it makes sense to see even a recession as a potential opportunity to increase their investments. But, those closer to retirement need strategies in place to make sure they can still afford to meet their target retirement date, even if the stock market trends downward for an extensive period of time.
4. Increasing Demand for HSAs
While 401Ks are the most common employer-provided retirement tool, health savings accounts (HSAs) are gaining in popularity. While HSAs are traditionally used to help pay out-of-pocket medical expenses as part of employer-sponsored health insurance, they are also a great retirement tool.
Because of the way HSAs are handled under state and federal tax laws, as people approach and enter retirement, having a healthy HAS balance can help make retirement more affordable and less stressful.
Employers are increasingly offering better HSA options to their workers.
5. Older Part-Time Workers
Improved health, changing cultural norms, and the changing workplace mean that many people are not retiring at age 65. Instead, many people are choosing to work into their 70s or even 80s.
One of the most important trends for employers to understand is that in the next decade, there will be many older workers anxious to work part-time. Older part-time workers benefit businesses because they are less expensive than full-time workers, their experience helps the business continue to innovate and grow, and they are excellent mentors to entry-level employees.
Employers should consider having a formal program for older workers who are nearing the traditional retirement age, where they first transition to part-time work.