5 Ways Your Boss Is Helping You Retire Better
Read on US News and World Report
Believe it or not, your employer wants you to be financially secure and ready for retirement.
If you’ve watched “Horrible Bosses” or “Office Space” one too many times, you may be convinced employers are out to make life miserable for their workers.
In reality, however, many bosses work hard to help out their employees. In fact, businesses large and small offer perks and programs designed to improve workers’ bottom lines and buff up their retirement savings. That’s because companies are realizing happy workers are good workers.
“People don’t walk into their place of work and leave their financial worries at the door,” says Steve Ulian, managing director of institutional retirement and benefits service for Bank of America Merrill Lynch. “Studies are starting to show employees are more productive [when financially stable].” For example, the 2011 PricewaterhouseCoopers’ Financial Wellness Survey found that 29 percent of workers said their personal finance issues were a distraction at work, and nearly half had spent time on the job handling their own money matters.
Since productive workers are better for business, companies are rolling out a number of programs to improve the finances of employees. Here are five ways your boss may be working to ensure you can retire better.
No. 1: Auto-Enrolling You in a 401(k)
Pensions are a thing of the past in many workplaces, and employers have replaced them with 401(k) plans. Originally, most of these plans were set up so workers would have to opt in to begin saving a portion of their paycheck for retirement. However, in recent years, some employers have begun auto-enrolling workers to ensure they are putting money aside for the future.
“Forty-seven percent of the plans we record-keep for are auto-enrolling,” Ulian says. “Seventy-eight percent marry auto-enrollment to auto-increases.” That means employers don’t only automatically enroll workers in a 401(k) plan but also automatically increase an employer’s contributions each year.
You may not think your employer is doing you a favor by taking money from your paycheck and putting it into a retirement plan, but it’s a relatively painless way to save for retirement. What’s more, money deposited into a traditional 401(k) is eligible for a tax deduction.
No. 2: Putting Their Money in Your 401(k)
In addition to making your 401(k) contributions automatic, employers may also be putting their own money in your retirement account.
Many companies make contributions into 401(k) plans as part of an employee’s overall compensation package. This money is typically subject to vesting provisions, which means the company retains ownership of all or a portion of the contributions until a worker has been employed a certain period of time. However, once vested, the money becomes a permanent part of the 401(k), and workers can take that money with them even if they leave their job.
Beyond those contributions, some employers may be willing to match some or all of your own deposits into a 401(k). Depending on the details of your plan, a 401(k) match can effectively double how much you put away toward retirement.
No. 3: Providing Professional Planning Help
Bringing in the pros is another perk your boss may offer. “The employer may pay the fee for an advisor to do simple things like providing financial advice,” says Keith Klein, a certified financial planner and owner of Turning Pointe Wealth Management in Phoenix.
Julia McCarthy, executive vice president of workplace investing at Fidelity, says her company sees businesses deploying a number of tactics to reach workers. Popular options include digital workshops, on-site workshops and one-on-one meetings between finance professionals and employees.
“Everybody at some point comes upon a question, or they need a plan,” McCarthy says. Offering professional services free of charge earns a company goodwill with employees but may also attract top talent. “Employers are looking for an edge,” McCarthy says, adding that this perk is one more way companies can sell themselves to the people they are recruiting.
No. 4: Putting Money in Your HSA
Health savings accounts are gaining traction as employers encourage workers to enroll in high-deductible health insurance plans. HSAs allow people to put money into an account tax-free to pay for medical expenses, but that money can also be invested and saved for later use.
“We’re seeing more and more people using [HSAs] as a savings account, not a transaction account,” Ulian says. Rather than putting money into the account and immediately spending it, workers are letting their balances build. It’s emerging as another way to save money for retirement.
To sweeten the pot, two-thirds of employers contributed to their employees’ HSA accounts in 2014, according to the Employee Benefit Research Institute. That money is counted toward the IRS annual limit on HSA contributions, set at $3,350 for those with individual health plans and $6,750 for those with family plans in 2016.
No. 5: Giving You Voluntary Insurance Options
Many workplace benefits packages offer the opportunity to buy voluntary insurance. These are plans, such as disability or long-term care insurance, which an employee will pay for entirely out-of-pocket. However, since the coverage is generally part of a group plan, premiums may be much lower than what people would pay if they purchased a policy themselves.
For workers, these voluntary benefits are another way employers are making it easier to be financially secure now and during your retirement years. Disability insurance can be crucial to pay the bills in the event of a serious illness or accident, but Klein says long-term care insurance many be even more valuable.
“There’s not enough being done about long-term care planning,” Klein says. Without proper planning, a nursing home placement or other extended long-term care could potentially wipe out the savings of some retirees. The U.S. Department of Health and Human Services pegs the average cost of a semi-private room in a nursing home at $6,235 per month, and Medicare isn’t likely to cover it.
The Ball’s in Your Court
The next time you’re inclined to think your boss hasn’t done anything good for you, remember he or she may be working to help you retire comfortably to that second home down South. “Employers are continuing to accelerate making their programs more impactful,” Ulian says.
However, it’s up to you to take the initiate to use those programs and perks to maximize your chances of achieving your very own “happily ever after.”