Human Resources News & Insights

3 barriers to retirement investing – and overcoming them

Even though many employees understand the benefits of investing pre-tax money in a retirement plan, many still chose not to. Here are employees’ top three excuses for not investing and how to get workers to move past them.

Excuse No. 1: ‘I can’t afford to save right now’

Everyone can sympathize with this excuse. It’s tough for many people to make ends meet these days. And the last thing on some people’s minds is paying bills 30 to 40 years in the future.

But what many employees don’t realize is that even a minimal investment now can make all the difference in the world during retirement.

Here are some options you can present to employees that may convince them to contribute something to a 401(k)-type plan:

  • Give up non-essentials. Do your employees eat out with their family, go out to the bar or buy lattes? Simply reducing the number of occasions employees splurge on non-essentials can leave them with a nice sum of disposable income that they can invest.
  • Contribute their raises. Have any of your employees received a raise recently? As long as their increased income exceeds their expenses, that extra lump of cash can be used to start building a retirement next egg.
  • Invest tax savings. The extension of the Bush-era tax cuts included a one-year reduction in workers’ Social Security taxes from 6.2% to 4.2%. That means an employee paid $25,000 per year will essentially be getting a $500 raise this year. That’s a nice chunk of change with which to start investing.

Excuse No. 2: ‘If my money’s invested, I won’t be able to use it when I need it’

For many people, their retirement accounts are their only source of savings. And should someone experience a financial hardship, it can be frustrating to have all of their assets tied up in a 401(k) plan.

However, many plans to include provisions that allow participants to access their retirement plan assets via in-service withdrawals and loans. In most cases employees will need to satisfy multiple requirements to be able to access their funds, but at least they’ll be comforted to know they can access that money if they absolutely need to.

When you hear this excuse, be sure revisit the withdrawal options and requirements under your plan with employees.

Excuse No. 3: ‘I don’t know anything about investing’

This excuse, too, is understandable. Investing is complicated. But chances are your plan offers some services to help educate employees about how they should invest — and if they’re not yet enrolled in your plan, they may have been paying much attention to know what service are available.

Next time you make a push to increase employee participation in your retirement plan, consider giving prospective participants access to your plans investment services. Chances are it’ll make them more comfortable with investing — a must if you’re going to increase sign-ups.

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