Offering retirement savings benefits as part of a company’s employer value proposition is essential to attracting, hiring, and retaining top talent. To help employees plan for their financial future, the most common retirement savings plan that employers offer for today’s workforce is a 401(k) defined contribution plan. A 401(k) plan allows employees to contribute pre-tax dollars to tax-deferred investments based on IRS annual contribution limits. Many employers offer a company match to employee contributions, with standard practices being a 50-cents-for-every-dollar match or a dollar-for-dollar match up to 6% of the employee’s contribution.
Financial wellness matters to employees. Unfortunately, however, a large portion of the workforce is not financially healthy. From an overload of debt to living paycheck to paycheck, individuals often struggle to maintain financial balance and make ends meet. When employees stress about finances, that stress doesn’t check itself at the office door when the employee arrives at work. Financial stress impacts an employee’s ability to do her job, which can lower productivity and eventually affect the bottom line.
Financial stress can harm mental and physical health. In the American Psychological Association’s 2019 Stress in America survey, 60% of respondents reported money as a significant stressor, which has been recorded at a similar level for the past few years. In a Bank of America Merrill Lynch report, 40% of employees said they spent three or more hours dealing with personal finances weekly, and 56% of employees revealed that they experience financial stress. Money management and financial stress are also cited as top reasons why many married couples file for divorce. These stats partly indicate why so many employees seek out employers that have a well-rounded benefits package with some type of retirement savings plan.
High health care costs during working years and in retirement can easily derail a financial plan. Employees need a long-term strategy. Fortunately, more and more employers are bolstering their benefits programs to help their employees build a stable financial future.