How to Help Millennial Employees Retire Early
Early retirement is a dream of many modern workers, and it has its benefits for employers, too. Senior employees typically have the highest salaries and the most expensive benefits packages. When these workers choose to take advantage of an early retirement, it allows the company to hire junior employees to fill the open positions. The new employees often cost less and have new technical knowledge and skills that can help grow the business. And for those businesses looking to downsize, early retirement helps prevent layoffs. For employers who want to help their employees retire early, below are four ways to encourage financial security.
Provide Education
The number one thing employers can do for their employees is provide financial education. Provide education on how to utilize retirement plans, manage their money to adequately save for retirement, estimate expenses in retirement, find tax breaks, and get out of debt. Employees need education on financial terminology, investing, insurance, and so much more.
Comedian John Mulaney jokes, “I read that this week, over two days, the DOW Jones dropped 929 points. And I can’t tell you how frustrating it is–to not know what that means.” But there’s truth behind this statement. Without a financial background, everyday employees may lack basic financial knowledge, which can cause frustration and stress, and lead to poor financial behaviors such as investing unwisely and using high-interest debt.
Investopedia points out, “A full 70% of the folks surveyed believed that once they’re retirees, they’ll be able to survive on $36,000 a year. According to the U.S. Bureau of Labor Statistics, the problem with this perception is that in 2018, the average yearly expenses for those ages 65 to 74 were $56,268 a year.” Without financial education, workers will be unprepared for retirement and won’t have nearly enough funds to retire on time, let alone retire early.
Offer a Retirement Plan
By offering a retirement plan for employees, employers give their workers a major advantage in saving for retirement. This is especially true for employers who offer 401k matching. Reports show 21% of American workers don’t have access to an employer-sponsored retirement plan. But employees who make regular contributions to a retirement plan, and receive a match from their employer, will be more prepared to retire early than those who don’t have access to an employer-sponsored plan.
For example, Extensis HR shares the following figures: a 35-year-old in 2022 who earns $50,000 a year can put $21 per week into their 401(k) with a 50% employer match and will be able to comfortably retire on time at age 67.
Offer Additional Benefits
In addition to a retirement plan, employers who offer benefits such as student loan repayment assistance help their employees prepare for early retirement. A majority of today’s workforce feels unprepared for retirement because of high debt loads and increasing costs of living. CNBC states, “In a world of conspicuous consumption, soaring living costs and mounting student loan debt, millennials find it difficult to invest for the future because they are struggling to afford the present.” Millennials, the largest generation in the workforce, owe an average of $40,000 in student loan debt. By providing student loan repayment assistance, employers help employees free up cash they can put toward retirement.
Additionally, medical benefits are a necessity, and by providing affordable medical benefits, employers help their employees avoid or minimize medical debt and unexpected expenses. Furthermore, benefits that focus on wellbeing, such as financial education, help minimize medical costs by reducing health problems associated with stress.
Encourage Financial Wellness
Workplace culture can strongly influence an employee’s desire to prepare for retirement. By fostering a culture that promotes healthy financial habits, employers can motivate employees to save properly and plan ahead for retirement. Forbes says, “It’s the responsibility of companies to take care of the complete financial needs of their workforce. But to accomplish this, employers should go beyond offering a competitive salary and benefits. Cultivating a company culture that holistically supports employees’ financial wellness is just as important.”
Encourage good saving habits among employees and conduct regular check-ins to see if any employees need additional assistance. Provide goal checkpoints for employees based on age so each employee has an idea of whether or not he or she is on track for retirement.
Along the same lines, it’s important for employees to understand how to take advantage of the benefits offered to them. 401k plans, insurance plans, stock options, and a myriad of other benefits can be very confusing for employees. Employers who help their employees make informed decisions help prepare them financially for the long term.
Conclusion
These are just four of the many ways employers can help their employees become financially secure and retire early. Education and wellness are two of the most valuable tools employees can have that will impact them for life. Benefits and retirement plans allow employers to take care of their employees and set them up for future success. Not only do these things support employees in their goals of early retirement, but they increase job satisfaction and encourage long term loyalty to the company.
Sources: Chron, EBN, Benefits Pro