Recently, EBN Associate Editor Lisa V. Gillespie sat down with Gerald Wernette, director of retirement plan services for Rehmann Financial, to discuss multiple issues facing retirement plan sponsors today, including the obligation to provide participants with financial education and how to give those education programs tailored relevance to employees across all life circumstances.
EBN: Anywhere from a quarter or more of employers have yet to reinstate their 401(k) match. In light of that, don’t companies have an even greater responsibility to provide comprehensive retirement and financial education?
Wernette: I think employers do, and they are starting to get that message. If employers are putting more of the burden on employees’ shoulders to build retirement savings on their own, I think they do have an obligation to educate employees along the way, give them the necessary guidance they need to make informed decisions.
EBN: What does the trend of delayed retirement have on the overall workforce landscape? Do you think future generations will be working longer based on what’s happening now with current near-retirees?
Wernette: Certainly from just a pure [perspective of] having enough dollars for people to retire on, investment returns are lower, and retirement dollars are going to have to come from somewhere. Employees are going to have to put in more, or employers are going to have to put in more. We’re certainly seeing the trend among employers a desire to [contribute] less, so the burden on employees is on employees to save more. So, employees are making delayed retirement decisions because they haven’t saved enough. But I think the other part that is going to have an impact is that you’re seeing healthier workers. You’re hearing 60 is the new 50 and 70 is the new 60; [those employees] aren’t ready to retire. Or, they’re defining retirement in a different context. In the old days, retirement was you hit an age and you just flat out stopped working. For a lot of people, retirement is taking off a month and then go back to work for three months, or working part-time.
And employers are going to need those skills, so [older employees] can say, “I’m going to continue to work, but I’m going to work on my terms.”
EBN: Employees today say that day-to-day expenses are they’re No. 1 impediment to saving. How do you think retirement education can address those concerns so employees see the urgency of saving?
Wernette: In that context, it comes down to employees being able to put saving into a framework that revolves around them. Traditionally, a lot of retirement savings education is pretty generic. What employees need now is to see that information put into their own context. A printout that says, “You’re this age and you’re making this much money. If you increase your retirement savings by 1%, here’s the impact it will have on you.” That really brings the story alive for people.
I think the other part is the ability to show employees things they can do that can have a meaningful impact on their retirement. I think a lot of people don’t realize that if they redirect some of their spending habits now it can have a meaningful impact on their future. I’m seeing that being incorporated into retirement savings tools that are out there today and that’s really helping people make better decisions.
EBN: Employees in their prime earning years—generally their 30s and 40s—tend to place their children’s education expenses above their own retirement needs. Do you think employees can effectively and affordably plan for both?
Wernette: I think they can. Part of the challenge is that it really requires discipline and is the average person out there disciplined enough? Statistics tell us no. So, it adds a lot of validity to auto-enrollment and auto-escalation. As employees work their way through their careers and get raises, using those raises to supplement their retirement savings along with a disciplined approach toward educational savings.
The neat thing about retirement saving in younger years is you’ve got time on your side and the key is taking advantage of that.
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