Gas prices inched up at the start of June to $3.79 a gallon in Idaho, according to AAA Oregon/Idaho. When considering whether to put extra dollars into their gas tank or into their 401(k), many individuals and families think they don’t have a choice. The gas tank usually wins.
That’s why now, more than ever, it is important for employers to help their employees keep retirement interests top of mind and help them consider what they can do now, even when budgets are tight, to build financial security for the future.
Reminding employees of the relatively small effect on take-home pay when setting aside pre-tax dollars into a 401(k) can be eye-opening. It’s easy for employers to do. A simple communication campaign that shows actual dollar-and-cent examples is all people really need to see the long-term benefits.
For example, there are many cost-effective communication vehicles that can be used in this kind of campaign. A company can send home bulk-rate postcards or hang posters in a break room. Neither option incurs a huge expense.
The content can also come together easily. One idea is to demonstrate the advantages of using pre-tax dollars to save with an example. Say someone earns $2,000 a month and wants to put $200 into a 401(k) account each month:
• In the 28 percent tax bracket the take-home pay is $1,440 after taxes ($2,000 minus $560 in taxes).
• Removing $200 pre-tax means the person is only taxed on $1,880 dollars, with take-home pay after taxes now being $1,296 ($1,880 minus $504 in taxes).
• The result is that it only costs $144 to set $200 aside in a 401(k).
The message could also include calls to action with simple instructions for how to increase 401(k) contributions. And the message could remind employees to review their savings allocations to make sure they continue to meet their long-term saving goals.
What does the employer gain from this kind of campaign? Communication campaigns that focus on caring for employees’ financial security send a positive message from the company that management cares about its people. That goodwill investment can be one of many tools to remind employees that what they get from their company is more than their take-home pay. They receive benefits that will take care of them in the future, when they’re no longer employed, if they take responsibility to keep financial planning top of mind, even in tough economic times.
Retirement savings communication is a win-win for employers and their employees. The cost is minimal, and the effect accumulates in two ways, both over time. Such actions from management build employee trust, and the accrual of investments gives employees peace of mind for a sound financial future.
Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company.