Get Workers Back On Track When Retirement Saving Derails

By Joel Mee

In response to the financial challenges created by the COVID-19 pandemic, employees may have put their retirement savings efforts on pause or tapped into their workplace retirement accounts for unexpected expenses.

Prolonged periods of economic and market uncertainty can be concerning when retirement is on the line. However, advisors are in a unique position to guide plan sponsors and reassure their employees.

Remind employees that retirement planning is a long-term investment. As an investment professional, you know that market fluctuations are normal, and the stock market historically recovers. But employees may need a reminder: Unless they are within five years of retirement, market downturns shouldn’t discourage employees from sticking with a plan.

Advisors can emphasize that properly diversified portfolios are built to weather market changes. And it doesn’t hurt to reinforce that staying the course can be one of the best strategies over the long term to ensure the best return on retirement funds. Most importantly, advisors, along with retirement plan sponsors, can reassure and guide employees with a calm and confident voice. For those employees who have recently borrowed from their plan or changed course due to the pandemic, advisors can offer reassurance that, when they are able to begin saving again, they will have the opportunity to rebuild their retirement funds through timely repayments of loans and a return to regular contributions.

Revisit plan design to get employees back on track. Retirement planning can often feel complex for employees. Before the onset of the pandemic, The Standard surveyed employees, and only 42% indicated they were comfortable with their current level of retirement preparedness. Given the challenging environment, that percentage has likely declined.

Now may be the perfect time to revisit plan design strategies that can support employee engagement, including auto-enrollment. This research from The Standard also shows that employees are receptive to automated programs, with more than 60% of them demonstrating an interest in professional and automatic services as part of their retirement plan.

Consider extra support to boost retirement readiness. For advisors looking to expand their reach and provide additional support, customized retirement planning tools can help individuals successfully meet their savings goals while eliminating guesswork. Managed programs can include an initial financial snapshot to identify the employee’s retirement income gap, a personalized investment plan, ongoing review and management of that employee’s investments, and regularly scheduled contribution increases, if appropriate. Encouraging conversations around the potential benefits of participation in supportive planning tools and services such as auto-enrollment can be valuable to employees.

Finally, even if someone has dipped into their retirement funds or began investing a bit later, it doesn’t mean they should delay future savings. Advisors and retirement plan sponsors can provide a sense of security by reminding employees about the differences between short-term and long-term investing. If providers are not using a managed account for employees, they often have tools such as a risk assessment, which can evaluate an employee’s risk tolerance. Sticking to the retirement plan should always be the priority while accepting that market uncertainty is an expected aspect of the retirement planning process.

Joel Mee is senior director of retirement plans at The Standard. He may be contacted at [email protected].