How to educate employees about their 401(k)

How to educate employees about their 401(k)


Humans feel stress on a daily basis. It’s a part of life, but that doesn’t mean it needs to creep into the workplace. Outside stress can cause a serious lack of focus among affected employees, and one of the biggest stressors is money. In fact, nearly one in three employees reports that personal financial issues have been a distraction at work. And one of the biggest financial concerns among employees is not being able to retire when they want [1].

As an employer, what can you do to solve this problem? Well, unless your employees plan to work forever, they’ll need a way to fund those work-free retirement years. And according to a recent study, 76 percent of U.S. employees say their employers should have “a meaningful role” in providing opportunities for them to be financially successful. What’s more: 86 percent of employees say it would be helpful to receive more education on retirement savings and planning [2].

It becomes clear, then, that to decrease the amount of time employees spend stressing about their finances on the clock, employers should provide some level of retirement readiness education. If your company has a 401(k) plan employees can contribute to, a good starting point is providing education about the plan. But you’re not an expert in the retirement industry, so how do you deliver information about your sponsored 401(k) plan without making it too complicated to understand? These three tips may help.

How to educate employees on 401(k) savings plans

1. Keep it simple

The most important part of employee education is to keep everything as easy-to-digest as possible. Most employees aren’t familiar with the ins-and-outs of retirement savings accounts, so if they are intimidated by any aspect, they might not sign up at all. Instead, provide the right amount information so they understand what they get if they sign up, such as an employer match and compounding interest (who doesn’t like FREE money?), and how to start contributing. Streamlining the process usually improves enrollment, and you can always offer more in-depth information for those who want to learn more.

It is also helpful to know your audience when deciding how to educate. Employees who have regular access to a computer may prefer online features such as webinars and videos, while those who aren’t as tech-savvy may need a more hands-on approach, such as convenient enrollment meetings and one-on-one appointments with someone who can help them set up their plan.

2. Be proactive

Saving for retirement can become “out of sight, out of mind” after enrollment. Event-based messaging, like an email reminding an employee who just got a raise that 401(k) deferred contributions can be adjusted to reflect the increase in salary, keeps their retirement savings plan top-of-mind and provides the opportunity to make changes—now or at a future date. Just keep these reminders to a minimum so the emails don’t become annoying.

3. Make investing easy

Part of saving for retirement is making the right choices about how to invest money and when to change the strategy. But how do employees know which funds are the best fit for them individually if they aren’t particularly investment savvy? Managed model portfolios simplify investment options with default age groups; a young employee is put into a more aggressive model and as the employee ages, the model becomes more conservative.

Sometimes it doesn’t matter how much education or how many opportunities employees are given—they’ll never make the effort to enroll. So having automatic enrollment and automatic escalation included as part of your 401(k) plan reduces the employee’s effort to start saving for retirement to nearly zero. They are automatically enrolled in the plan unless they make the effort to opt-out, and their contributions will automatically go up each year, reaching a predetermined cap, unless they make the effort to go in and change it. Automation gives your employees more time to focus on achieving financial security with the 401(k) education you’ve provided. And that’s the whole goal after all, right?


Nicholas Crary, CPFA - Financial Services Representative - nccrary@pai.com - 800.236.7400 Ext. 3381

Nick is a subject matter expert on 401(k), retirement savings, participant advice, small business 401(k), investments, education on options.