Help SMB Employers Improve Retirement Readiness

Quick look: It’s National Retirement Security Month, making it the perfect time for brokers to equip clients with the tools and resources needed to help their employees plan for a secure financial future. Stay ahead of the curve by exploring the latest retirement trends, from rising financial concerns and the growing number of employees reaching retirement age, to how younger workers are preparing for their futures. Plus, discover why partnering with a PEO can give you and your clients a competitive edge.  

October is National Retirement Security Month, a widespread effort to raise awareness of retirement saving options, increase personal financial literacy, and educate workers on achieving and maintaining retirement security.

Retirement is a hot topic for all staff. With an influx of workers hitting retirement age and younger employees more focused than previous generations on saving for their golden years, it’s an opportune time for brokers to discuss retirement readiness solutions with their clients.

The state of retirement insecurity

Many Americans feel unsure about the financial aspects of retirement. The National Institute on Retirement Security’s Retirement Insecurity 2024 report found that:

• 79% agree there is a retirement crisis (up from 67% in 2020)
• 55% are concerned they won’t achieve financial security in retirement
• 73% believe that recent inflation has increased their retirement concerns

Additionally, the report revealed many people are worried about rising costs during retirement, including:

• Long-term nursing care (80%)
• Healthcare (66%)
• Housing (75%)
• Assistance with daily chores like cleaning and cooking (66%)

The “Silver Tsunami”

Meanwhile, as financial concerns rise, a tidal wave of U.S. workers is reaching retirement age.

The nicknames “The Silver Tsunami” and “Peak 65” describe this surge, the largest of its kind in U.S. history. Sources state that over 4.1 million Americans will hit retirement age annually through 2027, with 11,000 expected to turn 65 in 2024 alone.

While some retirees will return to work, it’s important for business leaders to help their employees prepare for whatever lies ahead in their lives.

How are Gen Z and millennials preparing?

Transamerica’s 24th Annual Transamerica Retirement Survey of Workers found that younger workers take saving for their future seriously. More specifically:

• 71% of Gen Z employees save through employer-sponsored retirement plans and/or independently
• Gen Z workers started saving at a median age of 20
• Gen Z contributes a median of 15% of their annual pay to retirement savings
• They have an estimated median of $40,000 in household retirement accounts

Millennials have similar habits:

• 85% save through employer-sponsored retirement plans and/or independently
• They began saving at a median age of 25
• They contribute a median of 10% of their annual pay to retirement savings
• They have an estimated median of $50,000 in household retirement accounts

While the survey shows younger employees are making strides in saving for the future, just 14% of Gen Z have “a lot” of personal finance knowledge, and 30% of Millennials have a written retirement financial strategy. These trends highlight the opportunity for employers to provide financial wellness training in addition to retirement savings accounts.

How the SECURE 2.0 Act affects retirement preparations

The SECURE Act, signed into law in late 2019, enables small- and medium-sized employers to provide their staff with affordable, easy-to-manage “safe harbor” retirement plans.

Brokers should note that SECURE Act 2.0 was since written into law and includes the following changes that affect retirement preparations:

• Companies may match contributions to employee retirement savings accounts based on their employees’ student loan payments.
• 401(k) participants can withdraw $1,000 per year for emergencies, tax-free.
• Catch-up contribution limits for older workers increased.
• Part-time workers may qualify for employer retirement plans more quickly.
• Starting in 2025, businesses that offer 401(k) and 403(b) plans must automatically enroll eligible employees and provide a contribution rate of at least 3%.

Click here to view the entire SECURE 2.0 Act >>

How brokers can help

As older workers cycle out of the workforce and competition for top talent remains tight, brokers can help clients align their benefits strategies to meet the needs of both soon-to-be retirees and younger employees, who make up a sizable portion of the workforce and care deeply about growing their nest eggs.

Benefits

A 401(k) plan with an employer match is fundamental to retirement readiness. Additionally, these accounts are linked to recruiting and retention advantages, lower tax liability, increased tax credits, and boosted employee productivity and engagement.

Other financial wellness-focused benefits can help workers free up funds to save more for their future, including student loan repayment programs, flexible savings accounts (FSAs), and health savings accounts (HSAs).

Education

Brokers can help business leaders and human resources (HR) departments boost retirement readiness by conducting training sessions, webinars, and Q&A meetings, dispersing informational materials, and facilitating lunch-and-learns with plan providers. These resources inform employees about the importance of retirement planning and provide education on how their existing plan is structured.

Employers may also look to providers to host financial education sessions on topics like budgeting, reducing debt, and investing.

Partnership with a PEO

Another way brokers can assist is by connecting small- and medium-sized businesses (SMBs) with a qualified professional employer organization (PEO) company.

A PEO can provide access to Fortune 500-level benefits and group pricing advantages smaller businesses would otherwise miss out on. Additionally, a PEO’s benefits experts help SMB leaders ensure their current benefits align with what employees want, manage benefits communications, monitor compliance, assist with enrollment, provide employees with customer support, and more.

Fostering a brighter future, one client at a time

Workers turn to their employers to help them prepare for retirement, and brokers can arm them with the benefits and educational opportunities needed to attract and retain valuable top talent.

Brokers can help their clients gain an advantage by aligning them with a PEO partner that offers services and support in choosing the most appropriate retirement plan for their workforce. Additionally, brokers can play a stronger role in educating staff on the retirement benefits available to them.

Retirement benefits are top-of-mind for many SMB employers as older workers increasingly exit the workforce and younger employees focus on saving for the future. Reach out to your SMB clients to see how you can help them create robust retirement benefit offerings to appeal to and keep high-quality employees longer.

Are you searching for the best retirement readiness solutions for your clients? ExtensisHR has what you need. Explore our benefits solutions today or contact us to learn more about a partnership.