Are Your Employees Ignoring Their 401(k)?

A 401k-sponsored employer plan is a standard among competitive businesses. If your employees are ignoring their 401(k)s, they’re missing out on a ton of potential value. Keep them engaged with their 401(k) investment and, in turn, they’ll value you more as an employer.

Here’s how.

1. Promote Positive Awareness

The pre-tax advantages of a 401(k) plan is incredibly advantageous. Point this out to your employees. For every $100 of pay they defer to the 401(k), the entire $100 is invested in the plan — not reduced for taxes as it would be if it were paid directly to them. And any employer match increases investment potential.

At the same time, make sure employees know that your 401(k) plan operates under federal regulations. Although the value of their accounts may go up and down, it isn’t affected by the performance of your business because plan assets aren’t commingled with company funds.

2. Encourage Patience and Involvement

The fluctuations and complexities of the stock market may cause some participants to worry about their 401(k)s — or to try not to think about them. Regularly reinforce that their accounts are part of a long-term retirement savings and investment strategy. Explain that both the economy and the stock market are cyclical. If employees are invested appropriately for their respective ages, their accounts will likely rebound from most losses.

If a change occurs in the investment environment, such as a sudden drop in the stock market, it presents an opportunity for them to reassess their investment strategy and asset allocation. Market shifts significantly impact many individuals’ asset allocations, resulting in portfolios that may be inappropriate for their ages, retirement horizons, and risk tolerance. Suggest that employees conduct annual rebalancing to maintain appropriate investment risk.

3. Offer Financial Counseling

Some larger companies have their own retirement specialist to help educate and guide employees on how to best approach their 401(k) accounts. Most firms do not. There are plenty of companies that provide financial counseling services to employees as part of their benefits package. If you’re one of them, remind your employees that financial counseling is on offer.

Don’t do it yourself, though. Only independent advisers are allowed to provide investment advice to employees, under Department of Labor regulations. Get some investment advisors to come in and meet with your employees. It might be included as part of your vendor plan. There are many popular 401(k) providers to choose from.

4. Advocate Appreciation

A 401(k) plan is a substantial investment in time, money, and resources for any company. Encourage employees to appreciate your efforts — for their benefit and yours. We can help you assess and express the financial advantages of your plan. Contact us today to learn more about how we can help you plan for the future.