Daily budgeting concerns impacting 401k participation

Written by
Peter Dunn

What consumes the thoughts of your employees more than anything else both while they’re working and while they’re at home? Sure, occasionally the answer to this question will be politics, family, or health, but most of the time the one concept which consumes our thoughts the most is money. By no means am I suggesting that people are obsessed with money, but the reality is our lives are dictated by our need for our incomes. From the moment we get our first jobs, we create expenses to match our incomes. And as our incomes rise, we accumulate more expenses. For some, expenses accumulate faster than their income increases. Based on the latest research, the population of Americans who have more expenses than income is growing.

Unfortunately, the problems don’t stop there. When we earn our incomes, the money has three primary jobs. First, the income must help us pay for our past. From a financial perspective, our past is our debts. This includes student loans, credit cards, medical bills, or any other unsecured debt. Next, our income must fund our present. Most people call this their lifestyle. And finally, we have to worry about our futures. We do this by funding our retirement accounts.

What happens when our expenses outpace our income? Our futures don’t get funded. Until people get their past in order and rectify their present expenses, the future will always remain in doubt. Which is exactly why the United States is facing a huge retirement crisis. While the retirement crisis seems as though it only affects the individuals going through the crisis, that’s not the case. The crisis affects the business world more than anything else.

To begin, the financial stress associated with a lack of retirement preparation leads to major productivity slumps - both during the prime of a person’s career as they struggle to manage their bills and at what is supposed to be the end of their career as they can’t retire when they want to. From there, employers then are retaining expense employees, who are also expensive to insure, when the employees don’t even want to be working. It’s a recipe for disaster.

The solution isn’t the company 401k. How is a person who can’t afford their lifestyle supposed to put money in their retirement account? They can’t and they won’t. The solution is to help people with what consumes them on a daily basis - their daily personal finances. A 401k doesn’t do that. Don’t misinterpret this idea. A company-sponsored retirement plan (401k) is essential to a person’s ability to retire. But a financial wellness program is actually what allows a person to contribute to their 401k.

You must have a plan in place to help your employee’s with what they need help with the most. A proper financial wellness plan not only improves your employees’ overall financial health and gives them a shot at retirement, but it also decreases financial stress and increases productivity.

Step up your financial wellness game.

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