From time to time, I find myself roaming the country, assisting a corporate client in their desire to assess and improve the retirement readiness of their workforce. Normally, personal clients seek me out and arrive at my office ready and willing to engage in the financial planning process. However, in these corporate engagements, I show up in offices scattered across the country to meet individually with rank and file employees about their personal retirement goals.
Upon arrival, the first thing I discovered is very few of these employees have ever thought about retirement in terms of a financial plan.
Based upon this discovery, I have to assume most Americans have never actually planned for retirement.
A quick google search provides some staggering statistics about how low the average savings rate is for retirement in the U.S., but very little….too little is written or discussed about the need for a financial plan.
During these visits, I can clearly see all of this playing out. I’m there to evaluate retirement readiness, make recommendations, and report back to the trustees of the 401(k) plan so they may improve plan effectiveness. I meet one-on-one with the employees, and the stress is evident in their faces. Most are not sure how the assessment is going to turn out for them. Fear of the unknown: Fear they maybe didn’t realize existed until I showed up. But that concern had always been there, hidden from their consciousness, probably for years.
Interesting thing is, regardless of how well the assessment turns out, the stress melts away once I am able to tell them where they stand. Over and over, I watch their concern turn into engagement, as they start to work thru and make decisions based on the options available to them.
The human mind is astoundingly capable at problem-solving, but it must be fed good information in order to process good decisions. When we try to decide how much to save for retirement WITHOUT any idea as to how much we’ll need, disaster ensues.
This disaster is playing out across the country at all income levels. With the proliferation of 401(k) plans, we have put the onus on individuals to make their own retirement planning decisions.
Most of these individuals need help. By “help” I don’t mean literature, web resources, call centers, or automatic enrollment. These are okay, but really just band-aids that may or may not be effective, depending upon demographic and other factors.
One-on-one financial planning is by far the most effective means of improving retirement readiness. I know this from years of professional experience. A wide majority of people will not attempt to calculate retirement need on their own, and of those that do, most will inadvertently use bad assumptions and/or poor investment choices due to their inexperience.
By contrast, a good, initial retirement plan calculation can be completed at an adequate level within 15 to 30 minutes with a qualified financial planner. Why don’t more employers engage with fiduciary financial planners to help their employees make good retirement decisions?
I’m sure cost can be a hurdle, but there is already a cost associated with the 401(k) plan and services being provided. If those services are not contributing effectively to the employee’s retirement readiness, employers should shift their focus and their money.
What are your thoughts? Email me if you want to discuss.
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