When combined with features such as automatic enrollment, participant education has boosted participation rates over the past decade, says Jania Stout, but advisors are ignoring the day-to-day financial stressors that cause plan leakage and keep savings levels down.
Writing in the Summer 2015 issue of NAPA Net the Magazine, Stout writes that basic meetings about the importance of retirement plan savings help spur many employees to enroll in a 401(k), but do nothing to ensure that participants don’t cash out their plans when leaving their job. Considering that financial burdens are the top reason for stress, and the number one reason for divorce, Stout says that advisors must take an active role in providing full-scale savings education to their participants.
Stout notes that an employee who is stressed about finances is a less-productive employee, and it makes logical sense for an advisor and a plan sponsor to work together to help participants manage not just their retirement balances, but the rest of their income as well. Workers who are in debt, she writes, are far more likely to take their plan balances and pay off credit cards or car loans with them when they leave a job, as opposed to going through the rollover process.
Basic retirement plan education isn’t sufficient, Stout writes, noting that many employees have come to view these meetings as just another boring seminar, this time about something that they automatically contribute to and don’t feel actively engaged in. On the other hand, she says, full-scale financial education piques workers’ interest: they want to get out of debt, and they want help figuring out the best way to do so.
“Working Americans need help understanding how to eliminate debt,” Stout writes. “They need help to learn about the best ways to budget and how to pay for college or buy a house. These are the topics that we are now seeing pack the rooms when we provide employee education.”
The personal debt problem isn’t just something that low-income workers face, Stout says; she believes that workers making around six figures often have a significantly easier time accessing credit, and as a result, are more likely to use too much of it. She says a financial wellness strategy that is linked to a corporate health benefit should and will become the norm – after all, a financial secure employee is a less-stressed one, and less stress leads to better health.
In addition to Stout’s regular “Inside Financial Wellness” column, the Summer issue of NAPA Net the Magazine highlights what the new generation of plan advisors are thinking — including the 2015 NAPA “Young Guns” list — along with a recap of this year’s NAPA 401(k) Summit in San Diego, and the cover story, which examines five key factors that advisors should look at when determining whether longevity-planning options are right for their clients. The Summer issue also features regular contributors Nevin Adams, Steff Chalk, David Levine, Warren Cormier, Don Trone, Fred Barstein, Brian Graff, Jerry Bramlett and NAPA President Joe DeNoyior.
To view Stout’s column, click here and select “What’s Old Is New Again.” And to view a pdf of the full 48-page issue, click here.
