In an environment where savings and home equity are tappet, retirement benefit plans you offer to your employees have an increased importance. There are complicated administrative issues to deal with if you offer a retirement plan as an employee benefit, and you need knowledge regarding these issues even if you’ve decided to outsource these administrative duties. As an employer, you need to be certain that administrative responsibilities are being met.
Having a workplace retirement plan is important to your employees. As for employees, it’s also an effective way to retain talent and benefit the futures of your employees. Here is some advice on how to handle it the right way.
Employees can save more
With a 401(k) account, employees that are younger than 50 can contribute up to $18,000 per year, while those over 50 can contribute about $24,000 per year. When compared with the limits on IRAs (individual retirement accounts), this is much higher. IRA is a tax-deferred retirement account one can set up outside of work, and can save up only about $5,500 per year (younger than 50), and up to $6,500 a year (older than 50).
For those who don’t know, 401(k) is a workplace savings plan. It allows employees to invest a piece of their monthly earnings before the tax deduction. These savings grow tax-free until an employee’s retirement, at which point withdrawals are taxed as income. A large majority of employers boost their employee’s savings rate by matching their contributions up to a point.
Making an effective approach
If you haven’t reviewed and updated your business’ retirement plan, now is the time to do it. The productivity of your current workforce is paramount, next to capital investment, health care, and expansion through hiring that can be on hold. Retirement is on every worker’s mind. When reviewing your company’s plan, use efficiency as the deciding factor rather than cost. This will make your employees more productive and happier.
Make it about the employees
It is important for the employees to understand the “why” and the “how” of the retirement plan you offer. As is explained in this great blog post from online SMB lender ALC Commercial, saving for retirement is one of the basic financial goals and something everyone should strive for.
Spending some time effectively communicating the plan to them will notably increase the return on your investment in setting up a retirement plan.
Offer different options
Options such as pre-tax and post-tax features, automatic enrollment, and expanded investment options give the employee a stronger sense of control. By giving your employees a say in how their money is being handled will give them peace of mind, especially today in an environment where employees associate their retirement capital with their companies’ plans. Inform them of all the options they have for increasing their retirement capital.
Promote other employment benefits
Once you have the attention of your employees, promote other benefits of employment with your organization. When talking about their retirement plans, change the course of the conversation from “wages” to “hidden paychecks” or extras. Explain to them the company’s contribution to their flex time, medical plan, social security, and other life enhancing benefits.
By understanding the importance of retirement benefits, it will help both employees and employers to appreciate the value of a strong and competitive plan. A competitive retirement plan motivates both older and younger employees: the older employee sees a great exit plan after employment, thus is motivated to be productive, while the younger see an opportunity to grow their wealth within your company instead of seeking it with other employees.