Retirement Planning Intervention

Some experts believe we are on the brink of a retirement crisis.  Americans are saving less for retirement and it gets worse by the generations.  Forty six percent of millennials have zero saved even though they are in the best position to accumulate a nest egg of over a million dollars.  Instead, they are fearful of investing all together and have grown up in a spend economy.  How did we, as a nation, get to this state of unpreparedness?  Let’s look at how retirement planning has evolved.

In the late 1800’s, American Express created the first corporate pension plan.  A pension, also known as a defined benefit plan, is where the employer sets funds aside on behalf of the employee.  At retirement, the employee is guaranteed a specific amount based on salary and years of service.  During the decades after World War II, more employers adopted rich retirement plan offerings and completely controlled the process.  This was an age where workers spent their entire career with the same organization.  Employers never had to be concerned with retaining workers because they never left.

Times were changing.  Inflation, global competition, and shrinking margins forced employers to make a tough move away from pensions.  After the collapse of a few pension plans, such as Studebaker in 1964, the government stepped in to help make pensions more secure.  By enacting the Employee Retirement Income Security Act (ERISA), government pushed the extinction of pensions even further by making it costlier for employers to even offer them.

As pension plans began to be stripped from workers, they were left to start saving for their own retirement with little to no guidance.  Lack of diligent saving habits and knowledge in investing has caused Americans to fall short.  The 401k was created by the U.S. government in 1978 but was never expected to fully fund a person’s retirement.  This defined contribution plan leaves it up to the individual to set aside savings for retirement.  Employers offer a match of 2-3% at best.  Not only will this never be enough money to support people throughout retirement, but workers aren’t even putting enough money away to meet the match.  This is free money being left on the table.

We went from having the ultimate financial wellness benefit, the pension, to putting the entire responsibility on the individual.  A crucial step in this retirement shift was missed, education.  Not only are workers not conditioned to be responsible for their own retirement savings, they also have no idea how much money they will need.  Employers can help bridge this gap by implementing a financial wellness program.  Financial wellness programs offer unbiased, straightforward information about the fundamentals of money management.  The stress and struggles of living paycheck to paycheck are lessened which allows an individual to focus on longer term goals, like retirement planning.  They will also feel more confident in taking a more proactive approach in preparing for their future with the knowledge they have gained.  Contact Gold Standard Financial Wellness Company today to put a plan together that fits the needs of your organization at info@gsfinancialwellness.com.