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How to Help Employees Save for Retirement (and Plan for the Future) Amidst a Financial Crisis

The coronavirus pandemic has impacted our daily activities and, in many ways, our freedoms.

Over a third of U.S. workers (37%) believe that they would benefit from receiving financial advice during this uncertain time, according to a recent study conducted by Edelman Financial Engines. Yet, the solution to accomplishing our life goals are still very much the same. The steps that we take to help employees save for retirement and plan for the future have not changed, even amid this unprecedented situation.

To keep it simple, let’s focus on four key steps: save, spend, invest, donate.

  1. Save for your future.

    It is not true that you should only save in a retirement plan when there is a company match or profit-sharing. The key is to save no matter what and consider any “extra” contribution as a bonus. The ultimate responsibility to achieve a financial goal lies within each employee and any connective tissue linking an employer to entitlement should be forgotten. I lived in New Orleans for many years, and the word used to describe “a little extra” is lagniappe! That’s what a match is…just a little extra treat to thank employees for their hard work.

    Many employees maintain the mindset that “saving a percentage is too much for my family.” We should all consider shifting how we think about saving. My colleague George Fraser of RBG in Phoenix, AZ, reminds people to think about “Pennies on the Dollar®” Research, which has shown that reframing from percentage deferral to “Pennies®” for participants up to $150,000 in salary will mean 50% more in retirement income. This shift in thinking is another example of simple steps employees can take. It’s always easier to communicate in dollars and cents versus percentages as it makes it feel smaller. Only a couple of pennies can make a difference throughout life.

    One issue that this pandemic has uncovered is the lack of emergency savings. It was not the crisis that created this lack of emergency savings; it just exposed how close many employees are to being destitute. According to Bankrate, over 40% of Americans have less than $1,000, potentially forcing them to go into debt should they be faced with an emergency.

    As hard as it can be to save at times, it can be easy to say “yes” to a credit card or low-interest debt with the thought of dealing with this later.

    To help with the need for debt, employers can help employees take action by setting an emergency savings goal. As Certified Financial Professionals (CFP®), we have guided our clients to have 4 to 6 months of savings. However, rather than starting with a lofty goal – set the initial goal of $1000. Once achieved, crank it up to $2500 and then to $5000.

    The significant change we can all consider during a crisis is downsizing our life. The recent economic shutdown made us aware of which business were considered “essential.” A similar approach can be instilled when it comes to what goods or services a household might need. By taking an inventory of membership, subscriptions and luxury services that may not be needed in today’s working environment, such as dry cleaning or memberships in travel clubs, it allows individuals to reduce unnecessary expenses and lighten the “financial load.”

  2. Spend time with your family.

    I recently lost a dear friend, which is only another reminder that when we think of “spend” - spending time and being present with our loved ones must be on the top of this list! Employers also have the responsibility to remind their teams to have work and life balance. We are ultimately known for how we made people feel versus how much money we left. We should also spend time dreaming about the future.

    Employers can play an essential role in inspiring our teams to think bigger and perhaps challenge our team members to consider what retirement looks like to them. An excellent exercise for an employer is to host a challenge where each team member can present what this looks like to them.

    The challenge can be to make a video, a storyboard, or paint a picture or a collage visualizing their future. This game will help your employees begin the initial steps to making these dreams come true. If they know what it looks like, their financial advisor can help do the math to accomplish the goal. It is also a moment of self-accountability – if this is this goal, we can look back at it every few weeks, months or years to determine how much closer we are to the dream…versus only staring at how much money is in a 401k plan and worrying whether it is enough.

    On a more serious note, the financial crisis has, unfortunately, reminded us of the importance of estate planning and making sure that “things are in good order.” Use this moment to update beneficiaries. One thing I learned during the last few months is having a child over 18; they too must have a healthcare power of attorney’s in place so that doctors and nurses will talk to parents.

  3. Invest in your overall total wellbeing.

    We are all aware of the importance of being physically fit, but as employers, we can remind our teams that a "whole" person is more than that. Let's be sure to include topics such as being emotionally, mentally, spiritually and financially fit. The pandemic's stressors have showcased how interconnected these pieces are- stressors from job security (for ourselves or perhaps family members), markets crashing, fear and anxiety of getting sick, school-age children or parents at risk. We need to do a better job of helping our employees, again our most valuable asset, maintain good work and life balance. Happier and healthier workforce leads to higher productivity, lower absenteeism, more actively engaged team members and will produce better outcomes.

  4. Donate to make the world a better place.

    These times of crisis extend beyond ourselves and our family. The existing pandemic has showcased a thin layer between having food, shelter and clothing versus not. Taking this time to donate food, clothing, perhaps a few bucks or give time to our communities is more critical than ever. I have always stated that "if our community is not healthy…neither are we."  This is the essence of stewardship and the foundation of Corporate Social Responsibility (CSR). Doing something good is the right kind of contagious…it inspires others to do the right thing.

Finally, the key to all of this is to manage the message and have fun. There is still too much focus on business decisions or acumen versus just having to keep the message consistent and straightforward. Have the courage to try new ideas. Perhaps we should all consider using another word for retirement as it no longer defines the end game for many of us- it can be as simple as being happy and knowing that my family is loved.

These four action steps: save, spend, invest and donate are fundamental whether we are in a financial crisis or not. Each of these four pillars can be dialed up or down depending on the current world or economic situation, but they all play a crucial role.

There will always be another “event,” so if we can remind everyone of the basics, we can all accomplish our greatest hopes, dreams and desires.

Check out this recent article for more on this topic: Retirement Ready: Should you change your portfolio based on recent market volatility?

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