The last thing that millennials are likely thinking about is retiring, but that's what they should be focused on. Granted, bills stack up and student loans can haunt us for decades, but focusing on retirement is equally important. Here are a few ways that you can help your millennial employees look ahead to retirement.
Deciding When to Retire
One of the biggest and most important decisions about retiring is figuring out when you should actually do it. If you don't have a financial adviser on the company payroll, at least have one come in and talk about retirement plans. Too many people go into retirement without a financial backup plan, which usually ends with them taking a part time job somewhere just to get by. Younger people should make investment plans now, especially when it comes to annuities. Fisher Investments provides helpful tips, and if you're near Washington, you can look on YouTube to find driving directions to visit the Washington office address.
Advertising Your Retirement Plan
Never stop informing employees that you offer a retirement plan. They should be made aware when they start work with you and periodically throughout the year. Let them know what kind of plan you offer, whether it's a 401(k) plan, a 403(b) plan, a cash balance, or otherwise. They should be made aware when they'll be eligible for the plan and when they can contribute.
If you can afford it, offer to match contributions. It's difficult enough for employees to put money into their retirement fund, but with the extra incentive of employer matched contributions, it may be an extra incentive to go ahead and start contributing to their own fund. If possible, make a layout showing how much their funds would grow over the years if they deposited a certain amount of money into their account right now.
If you don't offer a retirement plan, educate and encourage your employees on IRAs. With an IRA, or Individual Retirement Account, you can contribute up to $5,500 a year. If you're older than 50, you can contribute more than that. Educate them on the differences between a traditional and a Roth IRA. If that fails to motivate them, illustrate it. Explain that after five years, if they contribute $5,000 and earn seven percent annually, they'll have $28,754. At the same rate, they'll have nearly $700,000 in 35 years.
Once a 401(k) plan is established and your employees are steadily adding to it, there may come a time when an employee needs money in a pinch. As a last resort, they may choose to take out a loan against their 401(k). Don't allow this to happen. As the employee is paying the loan back, they'll have less money available to put into the 401(k), which means they'll scale back their contributions.
Worse, if they're unable to pay back the loan within the time limit as outlined in the terms, they can be subjected to a 10 percent early withdrawal penalty tax, which will hurt them even more. As they continue to work for you and head toward retirement, be sure to keep them on the right path and don't allow them to take loans out against their 401(k).
Targeting Employees That Aren't Enrolled
Instead of preaching to the choir, specifically target those who aren't enrolled. Focus in on why they're not enrolled. Do they not care? Can they not get by after making their contribution? Work with them to find a plan and a contribution amount that works with them so they're not struggling to get by.
In a world where employees are practically begging for assistance with retirement, it's especially important to be proactive about this situation. Offer the assistance that your employees need and help them head down the right path to a comfortable retirement. Can you think of any other ways that you could help employees look ahead to retirement? Leave a comment below!