Retirement plans for employees should certainly feature in a company’s financial planning structure, and recent research has shown that workers are becomingly increasingly dependent on them, particularly as less of their wealth tends to be in home equity and savings accounts, than used to be the case.
However, while the importance of retirement plans to employees should be considered and acted upon if you’re the owner of a business, they do pressure you into designing a package that is both competitive for you and valuable to your staff.
Below we discuss in further detail, the benefits of such a package to employees and business owners:
The importance of retirement plans for employees:
Nowadays, more and more Americans are depending on plans at their place of work to keep them above water financially, when the time comes for them to retire. Features of many modern retirement plans designed by companies, includes ‘automatic enrolment’ and ‘employer match’, which make it much easier to build up a retirement nest egg.
For those employees in a higher wage bracket, nonqualified plans have become a vital source of savings, particularly when taxes are rising.
Health savings accounts are also proving popular, as Americans fear the rising cost of health care, and in general, more employees are becoming conscious of the importance of a good retirement plan and the need to be financially prepared when they are of retirement age.
The importance of retirement plans for employers:
Many companies, particularly in the current climate where health care costs are rising, and penalties are featuring more highly, are being deterred from taking on new staff, meaning that they need to take as best care as they can, of their current employees. You will need to keep your current workforce content and covered, and those who are loyal to your company, deserve a retirement plan that benefits them. A good plan is a fantastic way of encouraging loyalty and even productivity, and its importance should not be underestimated.
Recruiting, rewarding and retaining, or helping to retire:
Recruiting new employees and rewarding them sufficiently so that they will be encouraged to remain within your workforce, is all well and good, but as a business owner, you should also think carefully about the importance of helping them to retire. While it can of course, be of great benefit to your business if employees choose to remain working well into their latter years, it can increase costs for you, too:
- The individuals’ healthcare costs may be steeper
- Their salary may be higher than for comparable positions
- There is less opportunity for new and fresh talent to be developed, or encouraged to work for you
Offering these ‘baby boomers’ an attractive exit plan, helps them while helping you; they will be more motivated to be productive as a seasoned employee, and yet they also see a future while not being employed by you.
Having an attractive and competitive retirement plan acts as a fantastic motivator for younger employees as well; giving them an opportunity to grow their wealth while working for you, rather than going elsewhere to make their millions!