Although the U.S. economy is strong and the stock market continues to rise, most employees are worried about the future. Purchasing Power, a specialty e-retailer for organizations, reports that 87 percent of fulltime employees or their spouses are stressed about their finances — with insufficient retirement savings near the top of the list.
MassMutual, a mutual life insurance company, found similar results. Its surveys reveal about 72 percent of employees agree they haven’t saved enough for retirement. When you consider that the National Institute on Aging estimates the average 65-year-old man who retires will need at least enough money saved to last 17 years; and the average woman will need 20 years’ worth of savings, it’s obvious how important it is for employees to plan for their retirement seriously and early.
You, as an employer, can help your employees avoid retirement saving mistakes and get on the right track. Here are a few things you can do. Employee Problem: Saving too little. Employer Solution: An employer-sponsored 401(k) is a great way for employees to save.
An employee’s contributions are automatically deducted from their paycheck (what they don’t see, often isn’t missed). Plus, if you match an employee’s contributions up to a certain amount, their retirement savings increase even more quickly.
Some employers automatically enroll their employees into a 401(k) to ensure that they are saving for retirement. For instance, employers could deduct three percent of an employee’s income the first year and then step it up by a set percentage the following years.
The Pension Protection Act of 2006 requires employers to apply the deduction uniformly to all employees covered by the plan and the deduction must not exceed 10 percent of an employee’s salary. Employees have the option to opt out.