There’s little doubt many of your employees are looking forward to the day they can retire. For some, that may be little more than a far-off dream right now. For others, the day is rapidly approaching!
What can you as the employer do to help your employees prepare for this momentous life event? Turn out there are quite a few ways you can help employees at any stage of their careers begin planning to retire.
Help Them See the Big Picture
It can be difficult to get 20- and 30-year-olds to plan. It’s more difficult to get 60- and 65-year-olds to realize they could live another 25 to 30 years! How can you manage the perception of age in the workplace?
You can encourage your younger employees to start saving early. Good retirement planning can start at any age, although sooner is often better. Employees who begin to save when they’re younger will develop the habit more readily. They’ll also have more time to build their portfolios and weather storms in the financial markets.
Older employees don’t usually need to be convinced to prepare for retirement, although they may be playing the catch-up game. One of the problems is they may believe they need to retire by 65. Some may want to retire even earlier if possible, so they can truly enjoy their retirement.
Remind employees that they may have longer than they think if they retire at 65. If they’re not ready to retire by 65, it’s not a problem.
Help Them Manage Debt
Employees who manage their debt smartly will be better able to prepare to retire. While debt management and financial literacy programs have their own benefits, they can also help your employees as they prepare to retire.
Some retirees plan to take out reverse mortgages as financing. This strategy isn’t recommended. It uses up equity and can leave the retiree short of funds if they outlive their expectations. Instead, help your employees manage debt in addition to saving smartly for their retirement.
Help Them See Additional Costs
Many employers offer pension plans, but they rarely communicate to employees about the future costs of retiring. An employee may believe they can save the same amount for years and work toward a particular dollar amount, such as $1 million. Benchmarks like these are commonly given as “how much you should have to retire.”
Unfortunately, benchmarking doesn’t include planning for inflation. Over time, the value of a dollar lessens. That’s why it takes much more today to buy the same loaf of bread that cost 5 cents in the 1950s! The million dollars your employee saves today will not go as far in the future, which could leave them short on funds. This is especially true as many people are now expected to live into their 80s and 90s.
Taxes are also another unplanned expense for many retirees. People tend to forget every withdrawal from their 401(k) or IRA counts as income and will be subject to income taxes. Help your employees plan for these future costs. Offer them the support they need to create a plan that will help them save the right amount.
Help Them Plan for Health
As people age, health becomes an increasing concern. Most of your employees may be planning for retirement, but they’ve thought relatively little about the costs of getting sick. Unfortunately, many retirees do get sick! Medicare is often not enough, especially since it doesn’t cover long-term care costs.
Help your employees plan for unexpected illnesses within their retirement planning. By offering them the support they need, you can help your employees prepare for a long and happy retirement.