Lower 401(k) Participation
Principal Financial put out a helpful article in order to help increase awareness around 401(k) participation and what common barriers there are for people. In full disclosure Principal is a leading 401k provider and so it is in their best interest to have more money going in but that does not discredit the truth of what they produced.
First off, it is a growing reality that people are finding their retirement accounts less and less. One of the reasons Principal outlines is because of debt, inflation and other financial factors that are more important for people to fund. This is a theme I have spent a great deal of time on and cover it in my book The Future Poor.
The other roadblocks include eligibility and understanding retirement savings. Plans that do not have automatic enrollment have less participation. Oftentimes people do not even know if they are eligible or when that benefit kicks in. Auto-enrollment is a solution as well as places people into higher commitment plans which is beneficial for financial progress.
One shocking stat included in the article is that 59% of those not participating in a plan at work weren’t! This is part of the gap we currently have in America that needs to be solved. I have had these very clients that thought they were but actually were not participating. I have had clients that had been contributing for decades and didn’t even know it.
It is true that part of solving for the future poor is personal savings yet most have no idea how to do that, where they should be placing money, what investments to pick and taxes. Retirement is an entirely new equation than it was 20 or 30 years ago and it is no wonder the confusion that lives around finance things. If you are an employer or work in HR, take a look at this article because it could be a valuable resource for your workforce. If you are an employee, dust off your benefits and take a look at what’s available to you. As always, I recommend working with a professional that understands these things and can advise you how to take advantage of any benefits you have. Like the full disclosure at the start of this article, I am a financial professional that just recommended everyone work with me or someone like me. The evidence is strong that participation in savings plans and professionals make a difference in your financial outcomes.
https://401kspecialistmag.com/employees-not-participating-retirement-plan-401k-enrollment/
As always, if you come across a financially related article you’d like to send my way please do!
Best place to send them is to me.
More next time!
Jonathan