Andrew Glaze is the Founder & CEO of Wealth Stack, an emerging fintech company. He is also a CFA, former investment banker & Army veteran.
As a business owner in 2022, how many times have you heard yourself ask, “What do employees want?” After all, nearly 24% of the American workforce left their jobs in 2021, leaving small and medium-sized business owners, in particular, wondering how to not only attract top talent but how to retain them.
Well, the good news is that statistics support a pretty clear answer. Not only do workers want more money, but 62% seriously consider the availability of a retirement plan when deciding whether to accept or remain in a job. Furthermore, 76% of employees are likely to be attracted to another company that cares more about their financial well-being.
So, while the answer is evident in that the key to attracting and retaining top talent lies in offering comprehensive retirement packages and financial wellness programs, we often find that most business owners struggle with the reality of implementing those solutions.
At Wealth Stack, we’ve explored hiring issues and employee retention strategies with employers as part of building our proprietary app. Here’s some of what I’ve learned.
America’s Workers And Their Relationship With Retirement
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Are Americans prepared for retirement? Unfortunately, the answer to that question paints quite a dire situation.
More than one-third of Americans say they’ve never had a retirement account. That number is even direr for minorities. One study from the UC Berkeley Labor Center found that 7 out of 10 Latinos had no access to a workplace retirement plan and that over half of private-sector employees had absolutely no retirement assets.
While one major factor in this has been the lack of access to retirement plans, which state-mandated programs and even the Secure Act 2.0 are aiming to quell, other reasons are largely based on a lack of financial education.
It’s All About Financial Education
Workers we’ve spoken to feel that they don’t know enough about finances to invest in a 401(k), for example, or that they don’t even understand the basics of budgeting enough to feel like they’re able to put away enough each month into their SIMPLE IRA.
We’ve found that by offering financial education and training along with retirement benefits, employees are not only happier but they’re more loyal. In fact, 25% of employees agree that the most desired employer benefit is a financial wellness benefit with access to unbiased counselors or training.
Other Benefits Of Offering Retirement Solutions
While we’re on the subject of increased loyalty and employee satisfaction, let’s take a moment to talk about the other benefits of offering great retirement solutions to your employees. First and foremost, as this is all about hiring and retaining great talent, it’s important to note that 73% of employees say that their financial worries severely or majorly impact their productivity at work. You can do the math to see what that may add up to in losses for your business, but it’s likely not good.
Offering the right financial benefits and training can help increase productivity long after you’ve hired your top talent and onboarded them to your business. However, it’s important to ensure that you’re not only offering an easy-to-use retirement plan but also the financial training that goes along with it. Providing one without the other is like giving your employees great steaks to eat but no grills to cook them on.
State Sponsored Plans
As mentioned above, there are now dozens of states that are implementing mandatory retirement requirements for small-business owners. CalSavers, for example, just went into full effect on June 30, 2022, for business owners in California with five or more employees.
The Secure Act 2.0, otherwise known as the 401(k) bill, also aims to make it mandatory for businesses with 10 or more employees to offer some sort of qualifying retirement solution to their employees.
While this is great, the solutions they’re providing as part of these mandates aren’t exactly comprehensive. They lack the infrastructure needed to give employees the right investment options they need to really thrive financially. Likewise, they lack the financial education that most employees are looking for these days.
Finding A Simple Solution That Works For Your Business
Okay, so what does a simple, cost-effective solution look like? Ultimately, it’s one that is simple and affordable for you as a business owner yet also easy-to-use and education-focused for your employees.
In most cases, this isn’t a traditional 401(k). As an expert in the field and someone who works with a retirement platform, I’ve done a lot of research concerning the costs, benefits and issues of 401(k) plans.
What was created in the 1970s to supplement traditional pensions is now an outdated system that doesn’t serve small-business owners. The high fees associated with 401(k) plans and the regulatory framework they’re subject to are also deterrents for small-business owners looking for simple, cost-effective retirement solutions for themselves and their employees.
For these reasons, 401(k) plans are an outdated retirement model that no longer meets the needs of today’s business owners or workers. Instead, you can consider a SIMPLE IRA. We’ve spent hundreds of hours researching these types of retirement plans while also speaking to business owners about their preferences and needs.
SIMPLE IRA plans, time and time again, tick off many boxes for small-business owners in terms of cost-effectiveness, ease of use and what they’re able to offer their employees.
The bottom line? Investing in solutions and benefits that help your employees thrive financially is a crucial factor in attracting and retaining top talent in today’s tough hiring market.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.