It’s Not All About the Money

It's-Not-All-About-the-Money

The message concerning the advantages of a 401(k) including deferring more savings to the maximum limits, diversifying investments, and taking advantage of the company match has been beaten like a drum into employees’ and employers’ minds for the last several decades. Advisers talk about how adding the latest alternative investment can add 15 basis points of alpha to the plan or how increasing the company match can allow the highly compensated owner group to annually contribute 0.5% more to the plan. The focus is almost always solely on the financial aspects of what the 401(k) plan can provide and rarely, if ever, on the role that offering a quality plan can mean to your company’s ability to hire and retain top talent, foster employee loyalty, and contribute to your people’s mental well-being. At Grinkmeyer Leonard Financial we want to change the discussion surrounding the importance of a 401(k) plan from just numbers to people.

One of the first items to consider when addressing your company’s workforce is how to attract good people and then how to keep them. Increasingly, just offering more money is not cutting it when it comes to recruiting top talent. The Tower Watson’s Global Benefit Attitudes survey released in February 2016 highlighted that nearly 3-in-10 employee respondents prefer superior retirement or health benefits to pay and bonus, as well as almost 3-in-5 prefer some alternative to pay and bonuses. Employees want to feel as if they are valued by their employer and can see benefits as a clear expression of that value, more so than being offered an extra $0.50 per hour. Here is where plan design can have a meaningful impact on the company and its employees. If structured correctly, a match formula or profit sharing allocation in combination with a vesting schedule, can accomplish the goal of rewarding employees while, at the same time, giving them incentive to stay with the company.

Assuming you have hired the top people for the job, the focus should turn to keeping those people engaged and focused on doing their best work. Stress is a productivity and morale killer and more and more, saving for retirement is being cited as a top stressor. The good news is that you, as an employer, have the ability to help reduce that financial worry simple by offering a well-designed retirement plan. The Tower Watson’s Global Benefit Attitudes survey showed that in 2015, 79% of US respondents indicated that their company’s retirement plan is the primary way that they save for retirement. A 2016 study published by Lockton Retirement Services titled “Finding the Links Between Retirement, Stress, and Health” found that over half (52%) of their respondents reported that their employer’s retirement plan eased their financial concerns “a great deal”  and nearly all respondents (95%) reported that the retirement plan helped “a little” or “a great deal”.

Offering a retirement plan does not just reduce stress, but it also helps bolster confidence in a person’s ability to be financially secure in retirement. The 2016 Retirement Confidence Survey provided by the Employee Benefit Research Institute, in their March 2016 EBRI Issue Brief, reports that 74% of respondents with a retirement plan were “very confident” or “somewhat confident” that they will have enough money to live comfortably in their retirement years. This is in contrast to 39% of respondents with no retirement plan who responded they are either “very confident” or “somewhat confident”. (Such a retirement plan includes the respondent or their spouse having at least one of the following: IRA, DC, or DB plan.)

You may be thinking, “Sure, it’s great that my employees are less stressed and not as worried about retirement, but what does that mean for my company”? One well documented benefit is that employees who experience lower levels of financial stress are healthier and therefore, incur less cost to the employer in the form of absenteeism and lost productivity. The chart below from the Lockton Retirement Services illustrates the physical symptoms that manifest themselves at work.

Experienced Physical Symptoms Almost All the Time/ Frequently While at Work

Percentage of Respondents in These Categories

Ahead in Saving for Retirement

On Track in Saving for Retirement

Behind in Saving for Retirement

Fatigue

19%

19%

31%

Feeling Overwhelmed

9%

13%

31%

Anxiety or Nervousness

7%

10%

23%

Headaches

5%

10%

23%

Clenched Jaw or Teeth Grinding

4%

11%

16%

Insomnia

3%

7%

11%

Upset Stomach

5%

4%

14%

Depression

3%

6%

11%

Sense of Impending Doom

1%

4%

11%

I think that we can all agree that when a person is focused on dealing with physical ailments, they are less likely to be able to focus on getting their job done right.

As documented in this post, there is a significant amount of research to indicate the direct correlation between financial stress, physical ailments, and offering a retirement plan. When you look past all of the numbers and the statistics, what it really comes down to is the people in your organization and their quality of life now and in the future. Let us help you put the focus back on your people.

 

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.
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