5 steps to ease the wary into a retirement plan
Published June 21, 2013 1:57 PM
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Updated June 21, 2013 4:31 PM
1 Min Read
Let me show you how to overcome their objection because they would love to have their objection overcome, Edelman says. They want to participate; they just genuinely feel that they cant. With an ultimate goal of 10% paycheck deferral, here is Edelmans five-step process for getting even the least-willing employees into a defined contribution plan.
1. Start with 1%.
Cant get employees to commit to 6%, or even 3%, of their pay? If they still think thats too much, agree with them, Edelman says. Dont argue, dont try to convince them that they really can afford it youre not going to win that argument and theyll get upset
and never want to talk to you about anything else. Aim for the lowest possible deferral just as a foot in the door. Its better than nothing, and you can always
2. Up it by 1%.
Once a plan is started, it should prove easier to increase the deferral, either automatically or manually. Participants rarely notice deferrals once they have begun. Keep increases low.
3. Repeat until the bites get noticed.
For employees who never wanted into the plan, it may take them a surprisingly long time to object to increase features but, once they do, respect their objections. Halt the bumps, at least at first, so they have a chance to get accustomed to the new levels.
4. After they stop complaining, resume increases.
What you do is you get back to them in three to six months, Edelman says. You say to them: By the way, do you still notice? If you do this over a period of three, four or five years, they will get to a 10% rate. But if even this proves a struggle or if even 1% is an impossible request you have one move remaining.
5. Divert ½ of pay raises into the plan.
If employees simply refuse or arent capable of saving with the money theyre currently making, they may be more willing to play with future compensation. Those who turn down a 401(k) entirely might be convinced to pledge money they dont have yet. You dont have that money now, so you wont notice not getting it later, Edelman says. Your pay will still go up
and the other half well just set over here. Its a safe way to get someone into the cycle, and from there increases can begin.
