According to Gerald Patterson of Principal Financial Group, it is a good idea to automatically enroll employees in retirement plans. This will make money being saved for retirement a compulsory affair. This step-if taken- is important as employees at present enjoy the option of keeping themselves out of the default contribution rates or automatic enrollments imposed by employers. Patterson recommended that if the companies wanted their retirement plans to be a success, then they make such savings a mandatory one.
Solving retirement crisis
Patterson has a number of recommendations to solve the retirement problem. He recommends that employees should be auto-enrolled and at a default high. Even though the rates of auto-enrollment at the present time are at three percent, he said that it should be increased to six percent and then automatically increase every year until the rate touches 10 percent. Another of his recommendations is to stretch match. He said that employees regard the match amount as a savings amount and they does not go above that when it comes to savings money. It follows that employers should increase matching contributions over broader employee deferral.
One should also ensure that automatic enrollment is valid for all the employees and not limited to new hires. Patterson said that there is no link with the performance level of the employee and his or her fidelity to retirement plans. All employees should be included under retirement plans. If anyone wants to move out, then he or she can do so. He further recommended that technology should be welcomed, including educational ones like virtual financial coaches. He said that many people are ashamed to take the help of financial advisers. This is because they are neck deep in debt. However, a number of tools like the interactive virtual coaches could deliver superlative results. A number of tools are present to help employees.
Behavioral change is needed
Patterson says that these strategies can be a component of a bigger mission. This focuses less on education and more on the behavioral changes. Although a number of industry specialists say that retirement educational efforts are required, Patterson emphatically says it is not so. He believes that employees understand the need to save for their retirement. The problem is more about behavior and not education. A significant difference exists on what people sat about benefits and what they actually do. Patterson also said that working after retirement is not a feasible idea.