To meet the needs of real people, the focus needs to shift to broader financial wellness needs.
In a recent analytical study, Mercer found that the likelihood of retiring decreased as the balances in retirement funds increased. Let us repeat that: The likelihood of retiring decreased as the balances in retirement funds increased. This was not the typical textbook finding.
The findings lead us to believe that employers need to consider broader financial wellness rather than only employees’ and retirees’ ability to achieve a target income replacement ratio. No longer can we beat the drum “contribute more or else,” because many individuals dealing with immediate needs feel they have to focus more on servicing or reducing debt than they do on making extra retirement contributions. Employees will receive far more value from receiving help in making the best decisions to suit their own financial circumstances — not necessarily focusing solely on their retirement plans.
In addition to our theme of an increased focus on financial wellness, we also highlight a series of questions focusing on real issues that either do or will concern employees.
Are all the programs offered to help employees address their financial needs actually understood and used?
Do you know how different the retirement experience of men and women is likely to be in your organization?
Is your investment lineup working for your participant base?
Does your plan maximize tax efficiency, and do your employees even understand what that means?
Have you reviewed the appropriateness of your plan’s default investment alternative?
Have you ever thought about the challenges that result from having retirement assets in multiple places?
Have you recently reviewed your plan’s capital preservation option and determined whether any change is warranted?
Are you helping participants make better decisions at retirement?
Are environmental, social, and governance (ESG) factors a consideration for your investment lineup?
Are loans really deteriorating the financial wellness of your participants?