401k plans offer employees an excellent means to save for retirement. Yet, many workers often pass up the opportunity to participate in their company’s plan because the information presented may seem confusing or difficult to understand. With a little planning, you can help reduce the confusion.
As an employer, 401k information sessions should be carefully crafted to engage the interest of employees and educate them about the potential benefits of these plans. With a little effort, business owners can increase the effectiveness of these presentations. Here are some tips to help boost your employee 401k participation rates:
Prepare employees before the presentation. Do not assume employees have prior investment knowledge. Treat them as prospective customers. When announcing the information session, explain what they will learn and why the information is important to them. Emphasize how they will benefit from attending the session.
Keep the tone light. A little humor goes a long way in holding an audience’s attention. The presentation should use clear, simple language—avoiding legalese, jargon, and complicated charts and graphs. Investment tips and worksheets can be used to engage the audience. And, remember to leave plenty of time for questions and answers.
Gear the material to the audience. There is no reason to restrict employees to a “one size fits all” presentation. The material should be geared to the audience’s level of sophistication. Novice investors will be overwhelmed with advanced information, while experienced investors will become bored if too much time is spent covering the basics. If your workforce includes both novice and experienced investors, consider offering two information sessions and letting workers choose the one that is most appropriate.
Demonstrate how a 401k plan can make it easy to save for retirement. Many employees, concerned with stretching their paychecks from week to week, may fear they do not have the excess income to contribute to a retirement plan. A skillful presentation can address this concern by emphasizing the tax benefits of a 401k. With a few simple calculations, employees will see that once tax savings are considered, their contributions will not take as large a chunk out of their paychecks as they might have thought.
Support employees in keeping contributions to a comfortable level. Do not overemphasize contributing the maximum amount allowable if that exceeds an employee’s financial ability. Point out that even a small contribution is better than none, especially if the company is matching all, or a portion, of it.
It is far better for employees to start small now and increase contributions later when they can afford to do so.
Use My Resources. As your financial advisor, I have access to lots of presentations and materials from the IRS, 401k record-keepers and mutual fund companies. And I’m happy to share. Call me to discuss.